1. Service and Loyalty Models
Prepared by Steve Raybould 1

2. Service / Loyalty Models:
• Jones and Sasser: Apostle Model
• Christopher, Payne and Ballantyne:
Segmented Service Strategy
• HBR’s Service-Profit Chain (Heskett & Sasser)
• Gallup’s ‘Human Sigma’ © Chain
• Hay Group’s 7-circle business model
Prepared by Steve Raybould 2

3. The ‘Apostle’ Model
Source:
"Why Satisfied Customers Defect"
by Thomas O. Jones and W. Earl Sasser, Jr.
in Harvard Business Review, November-December 1995.
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4. Is every ‘loyal’ customer a satisfied
customer?
• Is customer loyalty always a product of
customer satisfaction and the successful
handling of complaints?
• Jones and Sasser say it’s not necessarily so.
• Their model suggests that we need to
understand a customer’s real reason for
staying with us.
• Their idea has become known as the ‘Apostle
Model’
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5. Customer types in the ‘Apostle Model’
Satisfaction
High
Loyalist /
Hostage
Apostle
Loyalty
Defector /
Mercenary
Terrorist
Low High
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6. Customer Types:
• Loyalist/Apostle - high loyalty, high satisfaction -
"staying and supportive"
• Mercenary - low to medium loyalty, high
satisfaction - "coming and going; low
commitment"
• Defector/Terrorist - low to medium loyalty, low
to medium satisfaction - "leaving or having left
and unhappy"
• Hostage - high loyalty, low to medium satisfaction
- "unable to switch; trapped"
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7. Some examples:
• Loyalist/Apostle – Customers that keep coming
back, even though they may try others.
• Mercenary – Customers may be ‘satisfied’, but
are still on the look out for a better deal.
• Defector/Terrorist – Customers with higher
expectations or generally not happy and
constantly change product / brand.
• Hostage – Customers tolerating ‘the best of a bad
lot’, or high costs of changing supplier.
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8. For which products do you fit the
customer types?
• Loyalist/Apostle –
• Mercenary –
• Defector/Terrorist –
• Hostage –
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9. The segmented service strategy
Source:
: ‘Relationship Marketing’ by Christopher, Payne and Ballantyne.
Published by Butterworth Heinemann
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10. What is the segmented service
strategy?
• It is a way of identifying, prioritising customer
requirements.
• The segmented service strategy consists of
four stages
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11. The four stages of the segmented
service strategy
1: Define the market
structure
2: Segment customer base
and determine segment value
3: Identify segments’ service
needs
4: Implement segmental
service strategy
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12. Step One: Define the market structure
Construct a market map to show relationship of suppliers/producers,
intermediaries and the final users. Prioritise channels and channel strategy.
Insurance company
15% of profits 30% of 10% of profits 30% of
profits profits
Channel: Channel: Channel: Channel:
Insurance Call centre High street e-commerce
broker branches
Customer Customer Customer Customer
Group One Group Two Group Three Group Four
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13. Step Two: Segment the customer base
and determine segment value
Identify your most suitable segments.
Segmentation techniques can include:
• Service options • Psychographic
• Value sought • Benefit
• Industry type • Usage
• Geographic • Loyalty
• Demographic • Occasion
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14. Determining segment value
1. Determine profit projections for each segment
2. Identify potential for increasing customer
retention with in each segment
3. Determine how much it would cost to improve
customer service to levels necessary to achieve
desired retention – in each segment
4. Calculate net profit per segment – and prioritise
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15. Step Three: Identify segments' service
needs
Importance to Service Elements Performance
Customer
Low Medium High Poor Satisfactory Good
SPEED
A Segment
PRICING OPTION
Competitor
Profile RESPONSIVENESS
INFORMATION
QUALITY
HOURS OF
ACCESS
CLAIMS
HANDLING
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16. Importance to
Low customer High
A Segment
Performance Chart
(For each segment) Low
Your perceived performance
A B
A = Speed
B = Pricing C F
C = Response
D = Information
E = Access
D
F = Claims
E
High
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17. Step Four: Implement segmented
service strategy
Importance to
Low customer High
1: Identify areas of
Low
over-performance and
under-performance.
Your perceived performance
Service Under
SERVICE Performance
TARGET
CORRIDOR
Service Over
Performance
High
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18. 2: Identify costs of improving
selective service levels and fit with
organisation’s capabilities.
Five areas for developing strategies:
1. Good performance in services valued by
attractive customer segments
2. Invest in potentially profitable areas
3. Reduce investment in less attractive segments
4. Withdraw from areas of poor performance in
low profitable segments
5. Decide whether to commit in areas of poor
performance in attractive segments
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19. Factors to consider:
• Matching segment performance to the organisation's
capabilities
• Identify savings by reducing levels of service in areas of
over-performance
• Re-allocate expenditure to improve levels of service in
areas of under performance
• Estimate the additional costs required to achieve the
customer retention targets identified in Step Two
• Identify potential lifetime profits of segments in 'net'
terms. (Potential 'gross' profits minus the expenditure
needed to improve customer retention)
• Determine segment prioritisation
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20. 3: Finalise the segmented service
strategy
Identify:
• Your organisation's 'offer' in strategic terms, and
the rationale behind it.
• Which segments are you going to focus on, within
each channel
• The overall lifetime profit improvement based on
the selective improvement of service, and the
resulting improved customer retention
• A clear way of measuring your service
performance, so that levels of customer service can
be monitored and reviewed
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21. Harvard Business Review
Article “Putting the Service-Profit Chain to
Work” published in 1994 and 1998.
(Authors: James L. Heskett, Thomas O. Jones,
Gary W. Loveman, W. Earl Sasser, Jr., and
Leonard A. Schlesinger)
Emphasises value of designing a workplace
environment that creates satisfied, productive
employees.
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23. The Gallup ‘Employee Engagement’
• Great managers contribute to engaged
employees
• Emphasizes the human / employee element as
the gate to stronger profits.
• Uses Gallup’s ‘Human Sigma’© concept which
focuses on managing the employee-customer
encounter
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25. 5 Rules of ‘Human Sigma’ ©
RULE #1: E Pluribus Unum. Employee and customer experiences must be managed
together -- not as separate entities.
RULE #2: Feelings Are Facts. Emotions drive and shape the employee-customer
encounter.
RULE #3: Think Globally, Measure and Act Locally. The employee-customer encounter
must be measured and managed at the local level.
RULE #4: There Is One Number You Need to Know. Employee and customer
engagement interact to drive enhanced financial performance. And this interaction
can be quantified and summarized with a single performance metric.
RULE #5: If You Pray for Potatoes, You Better Grab a Hoe. Have a plan. Sustainable
improvement in the employee-customer encounter requires disciplined local action
coupled with a companywide commitment to changing how employees are recruited,
positioned in roles, rewarded and recognized, and importantly, how they are
managed.
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26. The Hay Group 7-circle business model
• Reinforces the importance of leaders’ styles
and competencies when creating an engaging
organizational climate for employees.
• Hay Group’s research shows that 20 to 30% of
the variance in revenue and profit in
organizations can be attributed to the
differences in organizational climate.
(Leadership competencies, leadership styles,
etc.)
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