MANAGING CUSTOMER RELATIONSHIPS BUILDING LOYALTY HMGT 4702 Hospitality

MANAGING CUSTOMER RELATIONSHIPS & BUILDING LOYALTY HMGT 4702 Hospitality Services Marketing Management

LEARNING OBJECTIVES Recognize loyalty plays as an important driver of service firm profitability, and the association between customer satisfaction and loyalty. Understand the strategies associated with the concept of “relationship marketing. ” Describe various types of loyalty programs and practice how to develop a right reward program. Appreciate why it is important for firms to target the “right” customer. Understand how tiering of service, loyalty bonds and membership programs relate to customer loyalty.

CUSTOMER LOYALTY Loyalty: A customer’s willingness to continue patronizing a firm over the long term, preferably on an exclusive basis, and recommending the firm’s products to friends and associates. Loyalty extends beyond behaviors including preference, liking, and future intention. Expected Service Perceived Service Quality Customer Satisfaction Customer Loyalty Future Behavior

WHY IS CUSTOMER LOYALTY IMPORTANT TO A FIRM’S PROFITABILITY? Customers become more profitable the longer they remain with a firm: Increased purchases and/or account balances Customers/families purchase in greater quantities as they grow Reduced operating costs Fewer demands from suppliers and operating mistakes as customer becomes experienced Referrals to other customers Positive word-of-mouth saves firm from investing money in sales and advertising Price premiums Long-term customers willing to pay regular price Willing to pay higher price during peak periods

CUSTOMER LOYALTY AND SATISFACTION Loyalty (Retention) Customer Satisfaction

TARGETING THE RIGHT CUSTOMERS Target the right customer How do customer needs relate to operations elements? How can service personnel meet expectations of different customers? Can company match or exceed competing services that are directed at same types of customers? Focus on number of customers served and value of each customer Some customers more profitable than others in the short term Others may have room for long-term growth “Right customers” are not always high spenders! Can be a large group of people that no other supplier is serving well

MEASURING CUSTOMER LOYALTY NOT all loyal customers are equal! Lifetime value: the amount of money customers spend with you from their first purchase to their latest purchase (or cancellation). Coffee Shop: $3 spent each time, twice/week, 40 years = $11, 520 (LTV of the customer) Churn rate: the amount of customers that stopped using your company's product or service during a certain time frame. Referral: the number of new customers who sign up based on word of mouth. Net promoter score: customer’s intent to recommend the company (it doesn’t measure action).

CHOOSING A LOYALTY STRATEGY Profitability Loyalty duration

TIERING OF SERVICES: THE CUSTOMER PYRAMID True Friend s Butterflie s Barnacles Strangers Figure. Customer bases based upon Profitability & Loyalty Duration

SIX STAGES OF CUSTOMER LOYALTY 1. Awareness – customer is aware of company and what it offers 2. Research (learn) – customer is considering purchasing, and has visited website, downloaded resources, etc. 3. Buy – customer has bought product or service 4. Use – customer uses the service that they purchased 5. Repeat – customer purchases from company again 6. Refer – customer refers friends or family members to company

TYPES OF LOYALTY SCHEMES Frequency Loyalty Program Points Loyalty Program Tiered Loyalty Program Fee-Based Loyalty Program Cash Back Loyalty Programs http: //www. customerinsightgroup. com/loyaltyblog/bran d-loyalty/what-different-types-loyalty-programs

CHOOSING A LOYALTY PROGRAM THAT IS RIGHT FOR YOU Which program will best engage and compel your guests? What type of loyalty program aligns with your concept type and brand? What kind of program can your staff effectively execute? Which one will help you achieve your restaurant’s financial goals?

SAMPLE RESTAURANT LOYALTY PROGRAMS