Customers relationship is the optimum goal!!

Managing customers satisfaction and retention is necessary for any brand, especially in service sector. The customer relationship process has one fundamental goal; maximising the life time value of customers which will lead to future flow of new profit discounted back to the present that can be attributed to a specific customer. Basically, it means that if the customers are satisfied with the quality of product/service, there is a higher tendency that they will continue using the brand and become loyal customers eventually. However, in order to manage this efficiently, brand needs to realise that not all customers are equally and as profitable as others. Targeted customers must be identified so that brand can devise strategies to enhance possibility. Good relationship also starts with a good fit between customer needs and company capabilities. The process starts by identifying who we are, who we are targeting and who we should be serving. Especially in luxury market, brands have to be selective and emphasize the importance of serving a well-chosen portfolio of carefully chosen segments and taking great care to build and maintain their loyalty.

There are 4 types of customers based on the concept of relationship with customers.



1) Platinum constututes a very small percentage of the customer base but contributes a large share to the firms profits. They are not price sensitive but expect the highest service levels. According to Pareto's famous principle of the 80/20 rule, 20 percent of customers account for 80 percent of sales (Tracy, 2009). Therefore, the company needs to focus on managing those 20 percent efficiently. They are very committed to the brand.

2) Gold has a larger number of clients than the platinum tier but they contribute less profit. They are more price sensitive and slightly less committed to the brand.

3) Iron provides a customer base and can give companies the economies of scale; reduction in cost per unit as a result of an increasing level of production (Investorwords.com, 2011). So, they are important since the company can build and maintain a certain capacity level and they are marginally profitable.

4) Lead tends to generate low revenues but requires same level of service and high management costs as others.

Furthermore, it is a strategic philosophy of operating a business to focus on keeping current customers and improving relationships with them rather than investing in acquiring new customers. The aim is more on retention and enhancement of customer relationships. Now, the question is what make customers loyal to a brand? What are the drivers leading to customer loyalty? These are example of answers we got from class discussion;

- How the brand make you feel?

- Delivering positive experience

- CRM programmes

- Well-trained & well-mannered staffs as the face of the brand

- Never critisize customers' taste and choices

- Go the extra miles

- Staffs always leave their personal problems behind when they are on duty

- No yawning!

- Perfect fit between brand personalities and customers' taste

However, how do customers evaluate the services? Services can be difficult to evaluate before purchase since it is considered an intangible product. Customers tend to worry about the risk of making a purchase that subsequently leading to disappointment. There are 3 criteria used to make an evaluation; search, experience, and credence attributes. Srinivasan & Till (2002) suggested that

"Prior to trial, brand name increases consumers’ perception of experience and credence attribute performance evaluations. However, brand name is found not to affect consumers’ perception of search attributes. Trial of the brand is found to reduce (and not eliminate) the advantage branded products have in enhancing consumers’ perception of experience and credence attributes."

One key point is that companies must have effective service recovery strategies for resolving problems and dealing with disgruntled customers when the level of satisfaction is below expectation.  

From my personal experience of good service, I thought about my dinner at Claridge's, one of the luxury prestigious hotels in London, a while ago.

It was my best friend's birthday and I booked 2weeks in advance for dinner at The Reading Room. I made reservation online and I received prompt response from the hotel staff. I did make a query that it was supposed to be a surprised birthday dinner and I asked them if there's any complimentary gift they could provide. They responded quickly offering a complimentary special dish. On that day, they had everything ready and they asked me privately who the birthday girl was. The atmosphere was perfect, warmy and cosy, not like any other stiff worldclass restaurants. Other customers seemed to relax and enjoy the moment. Some were having a business meeting and the staffs wouldn't bother and let them take their time. The staffs were all attentive and taking the best care for all customers, in the mean time, they gave enough space and respected the privacy of customers. I enjoyed my meal very much and with its high-quality of service, I intend to go back again surely. This could be an example of luxury brand with its mission to deliver the best service consistently.

It is doubtlessly why Claridge's maintains its good customer relationships and gains more loyalty customers, including Paul Smith whom I personally met there over the dinner and one of the big fans of this luxury yet cosy restaurant.

Bibliography

1. Tracy, B. (2009). Eat That Frog!; 21 Great Ways to Stop Procrastinating and Get More Done in Less Time. San Francisco: Berrett-Koehler Publishers.

2. InvestorWords.com (2011). Economy of Scale. Available at: http://www.investorwords.com/1653/economy_of_scale.html (Accessed 27 March 2011)

3. Srinivasan, S. and Till, B. (2002). "Evaluation of search, experience and credence attributes: role of brand name and product trial", Journal of Product & Brand Management, Vol. 11 Iss: 7, pp.417 - 431. Emerald Insight Collection [online]. Available at: http://www.emeraldinsight.com/journals.htm?articleid=857799&show=abstract (Accessed 27 March 2011)