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increased usage in pilot should drive 20% churn reduction ? Customer churn reduced more than 50% ? Downward migration reduced 2530% 30 percent typical impact Levers used High relevance Low relevance LAN99110437405571ZXS 21 Activities 4step approach to move to a higher loyalty trajectory ? Use knowledge of customer behavior profiles to reshape loyalty objectives ? Identify highest impact loyalty opportunities and prioritize efforts ? Conduct customer research to identify additional subissues driving loyalty behavior Realign loyalty strategy Select appropriate loyalty levers ? Reallocate loyalty investments toward highest opportunity options ? Curtail spending against low impact loyalty segments ? Align financial and human resources against highest impact opportunities Reallocate resources Measure and refine ? Use loyalty behavior profiles and pany situation to identify relevance of each loyalty lever ? Prioritize loyalty levers and establish time sequencing ? Develop pilots for 1 2 loyalty levers against target segments ? Leverage control groups and base lines to track impact of loyalty levers ? Continually refine approach based on impact of lever against Customer Control Map ? Measure returns on investment and use to justify future loyalty initiatives LAN99110437405571ZXS 22 ?Continue to extract insights from McKinsey Loyalty Research ?Complete perspectives on key loyalty levers –Redesigning product or service –Enhancing delivery channel –Executing marketing programs ?Develop engagement approach for helping clients drive stepwise loyalty improvement Loyalty team next steps 。LAN99110437405571ZXS Next Generation Retention and Loyalty LAN99110437405571ZXS 1 Consumer attitudes changing ? Increasing service expectations ? Loyalty less valued ? Less differentiation based on functional benefits alone Emerging forces creating new battleground for customer retention and loyalty Competition increasing ? New attackers emerging ? More alternatives available ? Pace of innovation accelerating Switching barriers falling ? Easier access to information ? Greater pricing transparency ?Fewer “personal” relationships ? New online purchasing models 1994 1998 Churn is up ? Tele 17% 27% ? Credit Card 6% 7% Share of wallet is down ? Dept. Store 77% 67% ? Grocery 25% 20% LAN99110437405571ZXS 2 ?What are the key drivers of customer loyalty? Satisfaction? Attitudes? Needs? ?How do drivers of customer loyalty differ within and across industries? ?Are some customers more loyal than others? High spenders? High shareofwallet? Older? ?Do underlying attitudes shape customer loyalty decisions? ?What levers are most effective for improving customer loyalty? Customer loyalty – key questions people are asking LAN99110437405571ZXS 3 McKinsey customer loyalty research Background ? Mail questionnaire to 2,100 . households ? 1,200 responses ? 16 product categories – Auto insurance – Life insurance – Retail banking – Credit cards – Home equity loans – Casual apparel – Grocery stores