Lecture 11 Models, Tools & Frameworks, Examples

What is the ‘Leaky Bucket Theory’ model?

Customers constantly leave ('leak') a business. Retention slows the leak, boosting growth & profitability.

What is the ‘Loyalty Ladder’ model?

A model showing the progression of customer relationships:

Suspect → Prospects → Customer → Client → Advocate

What is the ‘Wheel of Loyalty’ ?

3-stage framework:

1. Build a foundation,

2. Create loyalty bonds,

3. Reduce churn drivers.

Explain ‘Customer Relationship Economics’ framework.

Loyalty leads to higher profits through increased purchases, referrals, reduced service cost & lower price sensitivity.

Explain the 3 Loyalty Bond Strategies

1. Deepen relationship (cross-sell, bundle).

2. Loyalty rewards (financial & non-financial).

3. Higher-level bonds (social, custom, structural).

What is Customer Relationship Types Matrix

Categorises services based on relationship type (Membership vs. No Formal Relationship) and service delivery (Continuous vs. Discrete).

What did Jones & Sasser (1995) find?

'Satisfied customers defect' – satisfaction alone doesn’t guarantee loyalty.

What did Keaveney (1995) identify?

Identified top drivers of customer switching: service failure, pricing, inconvenience, lack of personalization.

Starbucks Example

Builds social & customization bonds. Baristas remember names/orders. Uses Rewards App to promote loyalty.

Amazon Prime Example

Deep relationship through bundling (video, music, delivery). Reduces churn with loyalty perks.

British Airways Example

Loyalty rewards via Executive Club. Non-financial perks like lounge access, priority boarding.

Spotify Example

Uses Customization Bonds—algorithms tailor playlists to user preferences.