Building Loyalty in the Luxury Market

8/3/2019 Building Loyalty in the Luxury Market

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Leading with luxury program

Building loyalty in the luxurymarket

Claudia Rodriguez, MS

San Ignacio de Loyola UniversityLima, Peru



Loyalty programs and the

luxury market





T ypes of luxury

consumers X-fluents:² Extremely affluents, spend heavily on luxury living

Butterflies:

² Powered by a search of meaning and newexperiences Luxury cocooners:

² Focused on heart and home Aspirers

² Highly attuned to brands and believe luxury is bestexpressed in what they buy and own

T emperate pragmatist:² Newly emerged luxury consumers. Careful spenders



Business logic for the

luxury marketCustomer logic T argeted

customer range

Product logic Lifestyle andself-identification

Economic logic Selected

locationsStructural logic Customization

focus



Loyalty, customer and from wherethey come from

T he word ćustomerµ is somewhat difficult totrack its origin back in time. We can go as far asthe times of the Roman Empire who had the´hospitium privatumµ similar as what weunderstand today as a ´right of asylumµ or to themedieval times where the Lords were pledged todefend their ćlientsµ or people that served themin case of invasions.

In the end, the core idea was the same; toprotect and, in doing so, prevent that theprotegé betrays them and shift lines with theenemy.



Key question:

Do Loyalty programsactually build customerloyalty?



Definition According to Shoemaker and Lewis (1998)

loyalty programs are offered to the

customers in order to build an emotionalattachment to the brand.

While customer loyalty is defined as thelikelihood of a customer to repurchase and

have a high level of emotional attachmentto the company. (Wijaya, S. 2005).



T ypes of loyalty

Attitude

L i k e l i h o o d

o f

r e p u r c h a s e Spurious

Inertia loyaltyPremiun

T rue loyalty

No loyalty Latent loyalty

L H

L

H

Backman and Crompton, 1991



Back to the basics« Question: where does the process of

building loyalty actually start? T he starting point: T he sale! Or even

before. It is much more than a marketing

initiative, it requires a culturaltransformation in the organization.

Be aware of focusing only on ćonquestmarketingµ«



Key concept What really drives repurchase is not

high-quality customer service, well-

managed communications or rewardsprogram such as frequent stayprograms«

Superior customer value, does.



Value and Loyalty

Desired

Basic

Expected

Un-anticipated

Customer value

Customer

loyalty

Level of service



Awareness

Interest

Evaluation

Action

Reevaluation

Reconciliation

Learning

Commitment

Repeatpurchase

Loyalty

Hierarchy of effects Hierarchy of Experience

Prior to the experience

MKT



Loyalty = Fidelity

T he quality or state of being faithful

Steadfast in affection

Loyal

Unswerving in allegiance/devotion

RAVING FANS!



Loyalty Programs: Working

definition

Process used by companies in order to

get the loyalty of their customers,meaning faithfullnes to their brand

that translates in continuospurchases



Working definition

Process used by companies in order to

get the loyalty of their customers,meaning faithfullnes to their brand

that translates in continuospurchases



´Loyalty means you retain a customerand increase the business you do with

that customer, developing arelationship so he/she will not belured away to the competition with

the promise of a lower priceµ

Ford,L. 1998.



Implications

Getting the loyalty of customers goes farbeyond the goal of retaining them. Itimplies the need to build a lifelong

relationship.T o do this we needto assess the valueof this lifelong

relationship and linkthis to thesegmentationprocess.





a. Attract new customers is

expensive

Selling to a new customer is 5 times moreexpensive than selling more to an existingone. (actually, it could be much more!).(McIlroy and Barnett, 2000).

An existing client buys easily from thecompany with whom has an existingrelationship



b. Loyal clients generate lower

operative costs

Frequent customers are cheaper toserve as they know better theprocess, representing savings intime and costs, both for thecompany and the client.

T he effect of switching costs



c. Loyal clients bring more clients

Word-of-mouth effect

Credibility

Impact between 3 to 10 multiplier² Is this still true?

Be careful with

regional/international differences



d. Loyal customers tend to accept

higher prices A loyal customer is less attracted to

change service providers based solely

on price Because:

² Switching costs

² Fear of failure in getting what he or shewants

² Price of ´being-safeµ



Customer loyalty threats Price reduction policies

E-global distribution systems

Low switching costs Ćonformance to requirementsµ operational

policy

Access to competitive info

Nature of the business² In what business is the luxury-hospitality business?



T he process of building loyalty

First Imperative:² KNOW YOUR CUST OMER!

Database management/CRM² Who are they?² What do they prefer?² Why do they buy from me?² Pattern of behaviour



1. Design a competitive

offer Deliver value

Not only defined in

economic terms What is value for your

customer?² Freebies?

Customization? Smile?



2.K

now your customer Customer Information Intelligence

Opportunities for the hospitalityindustry² Frequent stay programs, Fidelization

Cards, Face-to-face Interaction«

What do you do with all theseinformation?



But this is not the final goal, thereal intent is to evolve into a realpartnership!

3. Build a learning

relationship



How do you learn from

your customer?



4. T rain your staff

Your staff is key in this process, theyare your ´spiesµ all-around«

Develop customization-skills among them

Empower them to ´break the rulesµ

T rain them to develop listening skills,recovery skills and handling complaints



In hospitality services, the human-factorplays a strategic role in customer loyalty

but to be effective, they must we awareof:² Building and maintaining a learning relationship

² T he fragility of this relationship

² T he life-time value of the customer² T he importance of service-recovery



5. Stage your act wisely

CustomerSatisfaction is notenough«

Minimize CustomerSacrifice

Stage CustomerSuprise«stage the

unexpected! Stage CustomerSuspense



Customer Satisfaction is

not enough ´«just having satisfied customers

isn·t good enough anymore. You don·t

own those customers. T hey are justparked on your doorstep and will beglad to move along when they findsomething better«µ

Blanchard and Bowles, 1993



´«customer satisfaction is now just arequisite for loyalty, but satisfied

customers may not become ever, loyalcustomers«µ

Bowen and Shoemaker, 1998



6. Aftermarketing

activities Any activity directed at current

customers with the express purpose

of increasing those customers·likelihood of repurchasing a productor service in the future, or ofincreasing their share ofrequirements.

Vavra, T and Pruden, D. 1995



Loyalty at Leading

http://www.lhw.com/LeadersClub/lchome.aspx



Issues about Loyalty programs

in the luxury market A one-size fits-all loyalty strategy

doesn·t work in the luxury market.

Loyalty programs in this market mustbe crafted around what really turnthe customer on and the rewardsthat will make a real difference to

them. Based on emotional and experiential

benefits.



Customer Loyalty

Management Staging of memorable events Use of relationship marketing tools

Staging of memorable events«forreturning customers! Developing a learning relationship with the

customer

Stage of surprise effect Customer relationship Management



Questions?



T hank you!

Building Loyalty in the Luxury Market

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