Belowzero customers BZCs

BZCs are simply unprofitable customers. The strategy for these customers may vary -they can be encouraged to develop towards MGCs, but more typically expenditure will be minimised if it is felt that it will be difficult to change their loyalty behaviour or the source of their being unprofitable. Again, digital media can be used as a lower-cost form of marketing expenditure to encourage these customers to make repeat purchases or to allow them to self-serve online.

Figure 6.2 Categorising customers according to value

Customer loyalty

Customer loyalty

'The desire on the part of the customer to continue to do business with a given supplier over time.'

Behavioural loyalty

Loyalty to a brand is demonstrated by repeat sales and response to marketing campaigns.

Emotional loyalty

Loyalty to a brand is demonstrated by favourable perceptions, opinions and recommendations.

Another core facet of relationship marketing is its focus on increasing customer loyalty, particularly of the MVCs and MGCs. Sargeant and West (2001) describe loyalty as:

The desire on the part of the customer to continue to do business with a given supplier over time.

To successfully develop retention strategies, it is useful to acknowledge that there are two types of loyalty, behavioural loyalty and emotional loyalty. Behavioural loyalty is the name given to behaviour that proves loyalty to the brand through sales. It means that the customer behaves in the way the brand wants, i.e. by spending money. Measures of behavioural loyalty include response rates to direct marketing to the customer base, 'share of wallet' and market share. Emotional loyalty acknowledges that perceptions and emotions drive behaviour. A customer who is emotionally loyal has empathy and attachment with a brand and company and is more likely to recommend it to potential customers.

This distinction, which is not always acknowledged, is critical to retention marketing. The two types of loyalty reinforce each other if they can be achieved together and strategies need to be developed to achieve both. On the other hand, customers who are only behaviourally loyal are at risk of lapsing as soon as they become aware of or can readily switch to another supplier. Likewise there is relatively little value from an emotionally loyal customer who does not exhibit behavioural loyalty!

Sargeant and West (2001) extend the concept of behavioural and emotional loyalty through categorising customers into one of these four types:

1 No loyalty. Customers in a category move from one supplier to another for reasons such as cost or price promotions or because they don't discern any difference in supplier.

2 Spurious loyalty. In this case the customer does not switch supplier due to inertia although they have limited emotional loyalty.

3 Latent loyalty. A buyer does have an emotional loyalty but it doesn't necessarily translate to behavioural loyalty - they may still 'shop around'.

4 True loyalty. The behavioural pattern indicates a single favoured supplier or product in a given category.

Customer satisfaction

The extent to which a customer's expectations of product quality, service quality and price are met.

The relationship between satisfaction and loyalty

Although the terms 'satisfaction' and 'loyalty' are sometimes used interchangeably, we have seen that they do not necessarily correspond. 'Customer satisfaction' refers to the degree a customer is happy about the quality of products and services. As a customer's satisfaction with products and/or services increases, so should their behavioural and emotional loyalty.

As we have seen, though, there may be customers with a high degree of satisfaction who don't exhibit behavioural loyalty, and conversely, customers who are behaviourally loyal may be at risk of defection since they are not satisfied. The implications are that it is important not only to measure satisfaction with online services, but loyalty also. In this way we are able to identify customers at risk of defection who are likely to choose an alternative and those in the zone of indifference. These are an important category of customers who, although they may have a high degree of satisfaction, are not necessarily loyal.

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