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Page 1
Basker Rangachari
Group Head, Strategic Alliances & Customer Loyalty
Group Consumer Lending
Gaining Customer Loyalty –
what does it take to succeed?
Cards AsiaShanghai, China16-17 Oct 2008
Agenda
What is loyalty? Does it really exist?
Why does loyalty matter to growing profitably?
Why is my loyalty program ineffective?
Trends in Loyalty – inside / outside banking
What does it take to succeed ?
Conclusions
What is Loyalty?
Loyalty describes a customer’s commitment to do business with a particular organization, purchasing their goods and services repeatedly, and recommending the services and products to friends and associates. (Barnett,2000)
Loyal Customer = consistent source of revenue over years.
Loyalty cannot be taken for granted. It will continue only as long as the customer perceives receiving better value than from another supplier.
Gaining loyalty with Premium Customers
Product Features, Premium Positioning
Comprehensive Rewards Program
Quality and Relevance of Merchant Benefits
Superior Customer Service
Status RecognitionStatus Affirmation Experiences
Recipe Recipe for for
SuccessSuccess
Recipe Recipe for for
SuccessSuccess
Research has consistently highlighted the following key drivers of loyalty with premium customers:
Sources: 1. MarketResearch.com report – US Market for Reward Cards 20052. Jack Aaronson, ROI Marketing (Clickz.com)3. TowerGroup Research reports
What will loyal customers do ?
Behaviors: Come back frequently Buy most expensive products Recommend to friends Give important suggestions
Emotions: Feel attached to provider / key staff Trust the provider Resist change despite competitors’ persuasion Willing to forgive mistakes
The Virtuous Cycle of Loyalty
Deliver Superior Value
Continuous investment in hard-to-match capabilities
Increase customer loyalty / gain repeat business
Tighten connections / create behavior change
Demonstrate trustworthiness
Increase customer satisfaction
Right Products
Relevant to Segments
Consistent Responsive Service
Efficient Processes
Creative Rewards
Page 7
Why does Loyalty matter to profitability?
Increasing focus on Loyalty
Mature Industries increasing competition High acquisition costs
Getting more transactions/volume Market share vs. share of customer
Competitive advantage Price Service quality Loyal relationships
Impact of loyalty on profitability
Empirical evidence shows:
It costs 5 times more to acquire a new customer than retain one 20-40% of your customers bring 80% of your profits Banks lose 22% of customers each year (1)
Improving retention by 5% increases customer NPV by 35%~90% (2)
Companies that have mastered loyalty management enjoy (3):– 38% higher profit margins
– 40% higher revenue growth
– 38% higher shareholder value creation
Caveat: Customer Satisfaction is NOT equal to customer loyalty 90% of customers who love a company will repeat purchases but only 30%
of customers who like the company will repeat (4)
60% to 80% of lost customers were actually satisfied (King, 1996)
(1) Breitkopf, David. “Mapping a Multi- Product Strategy for Points,” American Banker, 1 December 2004.(2) “US Loyalty Schemes Enter a New Phase,” Bank Marketing International, 31 October 2004.(3) Accenture Study 2005(4) Opinion Research Corp.
CEO’s See the Challenge
In a recent survey by The Conference Board, customer loyalty was cited as one of the top ten challenges for CEOs worldwide.
20.3%Improving productivity10
20.8%[Product] Innovation9
22.7%Speed to market8
22.9%Corporate reputation7
23.9%Stimulating innovation / creativity / enabling entrepreneurship
6
29.4%Customer loyalty / retention5
33.1%Speed, flexibility, adaptability to change4
33.4%Consistent execution of strategy by top management
3
36.1%Profit growth2
37.5%Sustained and steady top-line growth1
“Of Greatest Concern”
ChallengeRelative Ranking
20.3%Improving productivity10
20.8%[Product] Innovation9
22.7%Speed to market8
22.9%Corporate reputation7
23.9%Stimulating innovation / creativity / enabling entrepreneurship
6
29.4%Customer loyalty / retention5
33.1%Speed, flexibility, adaptability to change4
33.4%Consistent execution of strategy by top management
3
36.1%Profit growth2
37.5%Sustained and steady top-line growth1
“Of Greatest Concern”
ChallengeRelative Ranking
In Conclusion
Loyalty is not dead, its just more difficult to get
Balancing customer desires vs. profitable business
It’s an Art ….and a Science
Product + Service + Rewards + Emotion = Loyalty
Clear Strategy + Segment Focus + Adequate Investment + Consistent Execution + Continuous Enhancement = Success in Gaining Loyalty !!
“Profit in business comes from repeat customers, customers that boast about your product and service, and that bring friends with them” (cited in Lowernstein, 1995)
Page 12
Thank You !
Basker Rangachari
Group Head, Strategic Alliances & Customer Loyalty
Group Consumer Lending