Article Summary-the Mismanagement of Customer Loyalty

Topics: Profit, Word of mouth, Customer Pages: 2 (493 words) Published: November 13, 2008
1.Companies need a clearer understanding of the link between loyalty and profits in order to get strong returns on relationship programs. 2.Companies will have to find ways to measure the relationship between loyalty and profitability so that they can better identify which customers to focus on and which to ignore. 3.Loyal customers will be more familiar with a company’s transaction processes. Because they need less hand-holding, the company should find it cheaper to deal with them. 4.Consumers expect and get some tangible benefits for their loyalty. 5.Whether corporate or consumer, that a loyal customer is actually more price sensitive than an occasional one. 6.Generally loyal customers are more knowledgeable about product offerings and can better assess their quality. 7.Loyal customers can develop solid reference prices and make better judgments about values than sporadic customers can. It means loyal customers deserve lower prices. 8.Loyal customers market the company.

8.1The more frequent customers are also the strongest advocates for company holds a great attraction for markets. Word-of-mouth marketing is supremely effective. 9.To identify the true apostles, companies need to judge customers by more than just their actions. 10.The most common way to sort customers is to score them according to how often they make purchases and how much they spend. 10.1One of the most familiar is called RFM: which stands for regency, frequency, and monetary value). On the other hand, RFM is also a poor way to measure loyalty because it can’t distinguish between them-that is, it ignores the pacing of customer’s interactions, the time between each purchase. 11.There are four types of customers: the customers who have no loyalty and bring in no profits-Strangers. Identify early and don’t invest anything to them. 11.1Customers who are profitable but disloyal-Butterflies. Managers should look for ways to enjoy them while they can and find the right moment to...
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