Customer Loyalty MKTG Fall Professor Tom O Toole Office hours: As needed by appointment

Transcription

1 Customer Loyalty MKTG Fall 2018 Professor Tom O Toole thomas.otoole@kellogg.northwestern.edu Office hours: As needed by appointment Course Summary Customer loyalty is key to value creation by a wide and growing range of enterprises. This fiveweek course will provide you with a comprehensive framework for conceptualizing customer loyalty, a structured approach to the development of customer loyalty strategies and practical guidance for the development and execution of customer loyalty programs and marketing activities. Plus, we ll address new models for customer loyalty in the digital era. The aim of this course is to enable you to think critically about the subject of customer loyalty, develop sound customer loyalty strategies and design effective programs to secure and build customer loyalty in practice. Course Overview This course takes a strategic approach to the development of customer loyalty models, initiatives and programs. It has a practical focus that will equip you to undertake the methodical analysis, development and execution of a loyalty strategy in an actual business or other enterprise. The content, class discussion and assignments are all designed with this end in mind. To do so, we will use examples from a wide range of business categories, including B-C and B-B, and business situations. The course is built on a framework that provides a strategic approach to the development of customer loyalty: Customer Loyalty: A Framework for Thinking, Strategy and Practice Types and Definition Business Objective Customer Target(s) Drivers Enterprise Strategy Loyalty Program (Practical observation: People typically want to start with the last step. Hint: Focus on Drivers.) Customer loyalty requires an enterprise strategy. Thus, we will approach the subject from an enterprise viewpoint, not just as a marketing strategy or functional initiative. This will incorporate the extension of loyalty strategy to financial, operational, IT and other non-

2 marketing business functions. Plus, we ll focus on the requirement for and development of a sound business case for an economical and sustainable loyalty strategy. We will refer to academic research (e.g., psychological) throughout the stages of the framework to provide a theoretical grounding and applied insights. After concentrating on the development of loyalty strategy, we will then discuss how the resultant strategy may be executed most effectively, including but not limited to through a customer-facing loyalty program. While this is a course about loyalty strategy, not just loyalty programs, we will cover substantially the design, development and practicalities of loyalty programs. Likewise, this is not a course about CRM or customer data analytics, but we will articulate the tight integration of loyalty strategy and customer data use. Finally, we will focus on the key relationship between loyalty strategy and digital channels, plus emerging strategic developments (e.g., payment systems, delivery). Course Structure Week 1: A strategic approach to customer loyalty A. Types and definitions B. Business objectives and metrics Week 2: Differentiating customers and identifying loyalty drivers C. Customer differentiation, targeting and customer data D. Drivers Week 3: Developing an enterprise strategy for customer loyalty E. Loyalty strategy development F. Enterprise perspective and business case evaluation Week 4: How to design and develop loyalty programs G. Loyalty programs H. Marketing execution Week 5: Implementing loyalty strategy now and in the future K. Partnerships, alliances and coalitions L. New models for the digital era Course Schedule and Class Subjects Week 1 (October 26): What is customer loyalty and how does it relate to business objectives Types and definitions o A strategic approach to customer loyalty o Organic and artificial forms of customer loyalty o Affective, attitudinal, behavioral and advocacy definitions o Identifying the right definition

3 Business objectives o Brand and customer (e.g., brand development, customer acquisition/retention/churn/growth, cross-sell) o Financial and competitive (e.g., revenue, number/frequency of transactions, transaction size, market share, share of wallet) o Identifying the right business objective o Related ways of looking at and measuring customer activity (e.g., customer satisfaction, customer engagement, customer life cycle) o Metrics and performance measurement (e.g., promoter, frequency, revenue, share, value) o Aligning metrics with business objectives Week 2 (November 2): Differentiation of customer loyalty by segment/individual and how to identify its drivers (i.e., what increases/decreases it) Customer differentiation, targeting and data o Customer segmentation (e.g., type, value, usage) o Customer life cycle o Integration with CRM o Customer data systems and analytics Drivers o Defining drivers of customer loyalty o Types of drivers (e.g., competitive, product/service, customer experience/satisfaction) o Academic research on factors impacting customer loyalty (e.g., psychological) o How to identify, measure and prioritize the drivers o Using drivers for strategy development Week 3 (November 9): How to develop a business strategy for building customer loyalty and determine if there is a sound business case for it Customer loyalty strategy development o Putting it all together: definition, business objective(s), metrics and drivers o Differentiation by customer segment o Customer value proposition o Integration with customer journey o Competitive responses Enterprise perspective and business case evaluation o Customer loyalty as an enterprise strategy Product/service features Operational implementation and points of customer contact Systems enablement Digital enablement Forms of payment

4 o o o o Business case development and evaluation Projected business value Required investments and costs Criteria for success Week 4 (November 16): How to design a customer loyalty program and execute it through marketing activities Loyalty programs o Core elements o Structure and features (e.g., earned value, product/service, differentiation/recognition) o Design and development o Economics and accounting o Operations and systems How to execute a customer loyalty strategy through marketing activities o Non-loyalty program approaches (i.e., no customer-facing loyalty program) o Targeting and individualization o Triggered marketing o Promotional activities o Digital channels Week 5 (November 30): How to extend a customer loyalty strategy beyond the enterprise and advance emergent models for customer loyalty Partnerships and alliances o The rationale for loyalty partnerships and alliances o Developing loyalty partnerships and incenting multi-category use o Criteria for developing/evaluating partnerships and alliances o Multi-party alliances and loyalty coalitions New models of customer loyalty for the digital era o Generational preferences (e.g., millennials) o Loyalty eco-systems o Mobile-centric o Social media o Networks and platforms o Bitcoin and other digital currencies Textbook and Readings The textbook for this course is: The Loyalty Leap: Turning Customer Information Into Customer Intimacy. Bryan Pearson. Penguin The course textbook is available electronically at Amazon.com and Barnes&Nobles.com. Professor O Toole will also have a limited number of hard copies available for purchase, if preferred.

5 Additional readings (e.g., academic research papers, HBR articles) with assigned completion dates will be posted to Canvas before the first class. The textbook readings to be completed in advance of the class date listed are: October 26: Loyalty Leap chapters 1-4 November 2: Loyalty Leap chapter 5-6 November 9: Loyalty Leap chapter 7-8 November 16: Loyalty Leap chapter 9-10 Category Examples Each week we will use a specific industry category to illustrate and apply the subjects being discussed. No advance preparation by students is required. Students are welcome to suggest additional categories that may be incorporated. Throughout the course, we will also refer to B- B examples, not just B-C. The respective weekly categories will be (subject to change): Week 1: Restaurant chain Week 2: Hotel chain Week 3: Airline Week 4: National store retailer Week 5: Digital retailer Assignments The assignments are intended and designed to provide you with an opportunity to apply the strategic loyalty framework in a manner very similar to how you would do it in actual practice. Assignment #1 is to develop a loyalty strategy. It applies what we will cover in weeks 1-3. Assignment #2 is to develop a loyalty program. It adds what we will cover in weeks 4-5. Assignment #1 due November 16: Develop a loyalty strategy for a cruise line Assignment #1 will be discussed in class on October 26. The cruise line category is similar to other categories that have well-developed loyalty strategies (e.g., airline, hotel), but has not advanced in loyalty strategy at the pace of other businesses. Your job in Assignment #1 is to develop a loyalty strategy for one of the top global cruise lines. There are different variations of this main assignment from which you can choose: Multi-brand B-C Single brand B-C Multi-brand B-B Single brand B-B

6 Assignment #1 will be completed by each student individually. Students will then be assigned to groups for Assignment #2. Assignment #2 due November 30: Develop a loyalty program and related marketing initiatives for a cruise line Assignment #2 will be discussed in class on November 9. In it, you (working in groups) will build on the loyalty strategy developed in Assignment #1, to develop a loyalty program for a cruise line. Again, cruise lines, despite the apparent similarity to other categories with well-developed loyalty programs, are less advanced in developing their own. You ll need to figure out how to develop a strategic, sound and effective loyalty program that will work as cruise lines navigate a maturing customer base, changing customer demographics and preferences, digital channels and related developments. The same variation choices from Assignment #1 will apply. Plus, your group can decide if you want to build on a loyalty strategy developed in Assignment #1 by one of the people in your group or develop a new one as the basis for your loyalty program in Assignment #2. Evaluation Class attendance and engagement 20% Attendance at the first class is mandatory. One absence during the quarter is permissible. Additional absences will proportionately impact the class attendance and engagement component of the grade. Engagement means coming prepared, participating in class discussion and contributing ideas, examples, comments and related input. This part of your grade is about demonstrating that you are intellectually engaged, thinking about how to apply the strategic loyalty framework and proactively contributing solutions (i.e., How would you do this in practice? ) Assignment #1 40% The whole point of this course is that loyalty development must be strategic. Thus, Assignment #1 is about demonstrating the application of the framework to develop a sound loyalty strategy from an enterprise viewpoint. You ll need to address how your loyalty strategy would relate to enterprise functions, including (but not limited to): operations, customer data systems, digital channels and more. You don t need to develop a complete business case for your loyalty strategy, but you do need to demonstrate that on a pro forma basis it is reasonably economical and sustainable. You ll need to avoid the typical pitfalls that include: ambiguous aims, approaching it from just a marketing functional viewpoint, and developing a set of marketing tactics

7 and calling it a strategy. You don t need to get into the specific implementation of the loyalty strategy. That s Assignment #2. Assignment #2 40% Assignment #2 is about thinking through and articulating the design of a credible loyalty program and related marketing initiatives to implement your loyalty strategy in practice. You ll need to solve the puzzle of designing a loyalty program for multiple customer segments and then explain how you would actually go about executing it. This should include: customer differentiation, customer value proposition, program features, integration with the customer journey and customer lifecyle, operational integration, enabling requirements, launch schedule and marketing activities. Comments On Grading of Assignments #1 and #2 I am mindful that this is a five-week course. Assignments #1 and #2 should each be about 5 pages long. (Somewhat longer is fine, but not required. Shorter is not advisable.) The purpose of the assignments is to demonstrate the methodical development of a loyalty strategy and loyalty program according to the loyalty strategy framework. In actual practice, you would elaborate in great detail each part of the strategy development and program implementation, but I don t expect you to do so in the period of weeks allotted for this course as a whole and for each assignment. These are intended to be very realistic assignments, meaning that they are quite similar to how you would go about developing a loyalty strategy and loyalty program or related marketing activities in actual practice. Thus, while you needn t know the actual business specifics (e.g., how long it would take to modify the Point of Sale system on a cruise ship), you do need to make reasonable business and executional assumptions. If you say, for example, In month 1, we ll build a CRM system that has a complete database of all of our previous passengers with detailed behavioral information, then in month 2, we ll integrate it with all of our digital channels and customer contact points, then in month 3, we ll develop and run a national television advertising campaign, then in month 4, we ll enroll all of our current and past passengers, that s not plausible and it will hurt your grade. There is no final exam for this course. Classroom Protocol Electronics: You may not use mobile phones in class nor use laptops for any activity other than taking notes. Tell the professor at the first class if you plan to use your laptop to take notes. If you use a mobile phone, or are evidently using your laptop for activities other than taking notes, the professor will ask you during class to stop doing so and it will directly reduce your engagement score for the class.

8 Punctuality: Class will start on time. Be there on time for the start of class. If you arrive late, it will directly reduce your engagement score for the class. Seating chart: Your assigned seat for the quarter will be the seat you choose for the second class session. The resultant seating chart enables getting to know everyone individually and facilitates taking attendance. Honor Code The Kellogg Honor Code is applicable in this class. The complete text of the Honor Code is available on the Honor Code web site. The Honor Code is enforced at Kellogg and violations are subject to disciplinary sanctions. For the two assignments, you may refer to related material available from other sources (e.g., hypothetically, an article on Why the cruise industry has been slow to adopt loyalty programs.) In such cases, you must: 1. Properly cite the specific article in your assignment 2. Add substantial original thought of your own, and be prepared to discuss your own contribution, using the reference only to inform or support your original thinking and the body of your own work If in doubt, about this or any other specifics or interpretations of any subject covered in this course syllabus, be proactive and ask the professor. I am always glad to discuss any subject.