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rate at which customers are migrating from higher value to lower value segments Pros ? Can be administered offline via surveys ? Simple to understand ? Adequate to attack broad dissatisfiers ? Linked to customer behavior ? In high churn environments, may be key value driver Tied to value loss before customer leaves pany Cons ? Not necessarily linked to behaviors ? Hard to use in share of wallet panies ? May miss value drivers Requires sophisticated tracking of customers’ behaviors LAN99110437405571ZXS 8 Loyalty is best measured along three dimensions Customer Loyalty Behavior Attitudes Satisfaction ? Reduce spending (., migrate downward) ? Spend the same ? Increase spending (., migrate upward) ? Inertial ? Deliberative ? Variety Seeking ? Emotive ? Satisfaction with previous provider ? Satisfaction with current provider LAN99110437405571ZXS 9 Four distinct attitudes characterize the loyalty landscape Source: McKinsey Loyalty Research 1999 Deliberative Variety seeking Emotive ? Frequently reassess choice of providers ? Reevaluate repurchase decision based on rational set of key buying criteria ? Frequently reassess choice of providers ? Proactively seek variety ? Rarely reassess purchase decisions ? Believe current provider is better than all others ? Reevaluation is not worth their time ? Casual apparel ? Inter Service Providers ? Cellular telephone ? Casual apparel ? Soft drinks ? Soft drinks ? Laundry detergent Characteristics Where most prevalent Attitude ? Rarely reassess purchase decision ? Believe changing providers is a hassle ? Convenience or apathy driven Inertial ? Life insurance ? Long distance telephone LAN99110437405571ZXS 10 Six customer behavioral profiles describe migration/retention dynamics Key issues ? What is the distribution of your customer base? ? Where are the areas of opportunity? ? Is your mix changing? ? Driven away by sources of dissatisfaction ? Seek variety ? Susceptible to petitive offers ? Needs change ? Low involvement ? Consider switching a hassle ? Continual reassessment ? Stay or go based on rational decision making ? Perceive real differentiation ? Rarely reassess purchase decision Customer loyalty segmentation Downward migrators Stayed loyal Dissatisfied defectors Active/ deliberative switchers Lifecycle adapters Inertial loyalists Deliberative loyalists Emotive loyalists LAN99110437405571ZXS 11 14%22%24%31%14% 15%7%29% 30%41%23%28%35%35%37% 24%43%58%69%44%37%29%53%38%26%21%16%25%28%12%10%22%21%16%32%6%8%13%9%12% 5% 12%10%3%6%8%2%5%14%0%4% 4%1%5%2% 1%3% 3%4%8%5%4%1%8%7%10%1% 1%1%3%1%0%Lifestyle adapters Emotive loyalists Home Equity 100% = Loyalty behavior profiles differ across industries Active/deliberative switchers Dissatisfied defectors Inertial loyalists Deliberative loyalists Auto insurance Long distance Cellular telephone ISPs Life insurance Retail deposits Credit cards Casual Appare