Page 244 - DMGT522_SERVICES MANAGEMENT

Unit 11: Customer Loyalty

“enrollment bonus” of 5,000 miles! As expected, the other major domestic airlines soon followed Notes
suit.
Management: CRM is not an activity only within a marketing department. Rather it involves
continuous corporate change in culture and processes. The customer information collected is
transformed into corporate knowledge that leads to activities that take advantage of the
information and of market opportunities. CRM requires a comprehensive change in the
organisation and its people.
CRM extends itself from customer acquisition to customer retention to customer delight. The
important steps are:
1. Identifying the right customer: The key here is right customer segmentation. Many
marketers have failed to realise that the old models and theories of segmentation have to
be changed dramatically. The segmentation criteria need to change from conventional
demographic/psychographic segmentation to need-based behavioural segmentation.

a. This will lead to the right definition of the right target customer. This paradigm
shift in segmentation criteria is needed because the conventional segmentation
criteria are losing their relevance with the evolution of the customer. Consumer
behavioral variables are more relevant and actionable and can help in the right
targeting. Hence marketers can develop sustainable business models and can
differentiate themselves from others by using high-level consumer behavioural
variables.
2. Retaining the right customer: It is very important to measure customer profitability. ROC
(Return on Customers) should be calculated on at least three dimensions: frequency of
customer purchases, value per transaction and profitability.
a. Customers who are low on all three dimensions need least focus, whereas customers
scoring high on all the three need maximum focus. The customers lying between the
two extremes need to be carefully analysed to decide the degree of focus required
for each of the segments.
b. Marketers need to lay down systems and processes (which can be very simple formats
and not necessarily require capital-intensive ERP systems) to keep track of these
dimensions. Identification and sizing of these clusters can help develop the right
strategies for each customer group.

3. Delighting the customer: Many marketers lose bottom-line focus in their efforts to please
the customer and may inadvertently erode business profitability. Marketers need to
develop strong value propositions in terms of better products and better services so that
strategies are not only customer-centric but also lead to high profitability. Pleasing the
customers should not be at the cost of hurting the company’s bottom line.
Box 11.1: Software Supporting Management Process
Specific software to support the management process involves:
1. Field service,
2. E-commerce ordering,
3. Self-service applications,
4. Catalogue management,
5. Bill presentation,
6. Marketing programs
7. Analysis applications.

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