Loyalty in Marketing Is Defined As Devoted Patronage Toward A Product. Loyalty Toward A Product Goes

THEORIES AND CONCEPTS
Loyalty Ladder
Loyalty in marketing is defined as devoted patronage toward a product. Loyalty toward a product goes
through several stages. Adapted from Payne et al., the stages are referred to as the loyalty ladder:
The figure above shows that there are four stages that customers and sellers go through in the loyalty ladder:
Stage 1: Prospect—The company identifies the possible buyers of the products. The company needs to start
engaging the target prospects to make the first sale.
Stage 2: Customer—The company succeeds to make a first sale. Theprospect became a customer. The company
needs to make sure that the customer repeats their order.
Stage 3: Client—The company succeeds to make a repeat sale. The customer became a client and is becoming
loyal. The company needs to make sure that the client advocates the
product.
Stage 4: Advocate—The company succeeds to make the client an advocate. The advocate is now brand
insistent.
The loyalty ladder is a tool that helps us analyze how relationship marketing works.
Let us look at this sample ad and see what stage in the loyalty ladder it is trying to achieve.
What stage in the loyalty ladder is XYZ Coffee Company identifying with? Where does the company want the
consumer to move to?
To further appreciate the value of relationship marketing, we will discuss the concept of customer lifetime value
(CLV).
Customer Lifetime Value (CLV)
Customer lifetime value is defined as the total profit of a business from the lifetime patronage of a customer. Let
us consider a customer of toilet paper. Assuming that:
 a company will have P2.00 profit/roll

 the customer uses 3 rolls a week.
 the customer is 25 years old and the lifespan is 60 years
CLV = # of rolls per week x # of weeks x # of years x profit per roll
= 3 x 52 x 35 x P2
= P10,290
From the example above the CLV is P10,920,00.
To ensure that companies build a strong relationship with their customer, we will discuss the different
relationship development strategies.
Relationship Development Strategies
1. Core Service Delivery

This is defined as delivering the benefit offering satisfactorily. This takes into consideration customer
expectations from the benefit offering and meeting these expectations.
For example, your expectation for a purchase experience includes immediate attention by the salesperson.
When you experience such, core service delivery is satisfactory.
2. Service Barriers
This is defined as obstacles for switching. The service barriers include customer inertia and switching costs.
For example, mobile companies offer free cellphones that come with lock-in period contracts.
3. Relationship Bonds
This is defined as a strategy that uses relationship ties to develop customer loyalty.
 Financial Bonds
This is defined as financial benefits that work toward strengthening the relationship. Examples are volume and
frequency rewards.
 Social Bonds
This is defined as social connection that works toward strengthening the relationship. Examples include
companies establishing continuous relationships, personal relationships with customers, among others.
 Customization Bonds
This is defined as customized offerings that work toward strengthening the relationship through customer
intimacy, anticipation/innovation, and mass customization. Examples include Amazon recommending related
books that you searched
while surfing.
 Structural Bonds
This is defined as structural links that work toward strengthening the relationship through customized value-
added innovative services to make the customers more productive. Example is online-banking where a bank
provides process alert through SMS or e-mail.
Companies can use these strategies considering the stages in the loyalty ladder and eventually achieving the
advocacy stage.
Customer Service Strategy in the Philippine Business
San Miguel Corporation is an example of a company with a successful customer strategy in the Philippines. It
started in 1890 as South East Asia's first brewery and is now producing one of the top 10 beers in the world.
From beer, its product lines now include food, beverage, and packaging. It has also engaged in power and
utilities, properties, mining, energy, tollways, and airports.
The company embraces social responsibility through environmental stewardship, community development,
education, health, livelihood development, disaster management, and volunteerism.

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THEORIES AND CONCEPTS

Customer Lifetime Value (CLV)

 a company will have P2.00 profit/roll

CLV = # of rolls per week x # of weeks x # of years x profit per roll

From the example above the CLV is P10,920,00.

Relationship Development Strategies

1. Core Service Delivery

Customer Service Strategy in the Philippine Business

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