03. customer values, satisfaction, and loyalty

THARAKA DIASMBA(USA), BBA(USA), Dip in Mgt, ACIM(UK), FAEA(Dip in AEA-UK), FinstSMM(UK), CPM(Asia), MSLIM

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How can companies deliver customer value, satisfaction, and loyalty?

What is the lifetime value of a customer, and why is it important to marketers?

How can companies cultivate strong customer relationships?

What is the role of database marketing in customer relationship management?

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Customer perceived value (CPV)—the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives.

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Total customer value Product value Services value Personnel value Image value

Total customer cost Monetary cost Time cost Energy cost Psychic cost

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A deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.

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A person’s feelings of pleasure or disappointment that result from comparing a product’s perceived performance (or outcome) to expectations.

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Quality (or grade) is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Forms Conformance quality Performance quality

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Correctly identifying customers’ needs and requirements

Communicate customer expectations properly to product designers

Be sure orders are filled correctly and on time Provide customers with proper instructions,

training, and technical assistance Stay in touch with customers after the sale Gather customer ideas for improvements and

convey them to the appropriate departments

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A profitable customer is one that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream for attracting, selling, and servicing that customer.

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Best conducted with an accounting technique called Activity-Based Costing (ABC).

Estimate all revenue coming from the customer, less all costs that go into serving that customer.

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Describes the net present value of the stream of future profits expected over the customer’s lifetime purchases.

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Customer relationship management (CRM) is the process of carefully managing detailed information about individual customers and all customer “touch points” to maximize customer loyalty. Touch point—any occasion on which a

customer encounters the brand and product.

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1. Identify your prospects and customers

2. Differentiate customers in terms of their needs and their value to your company

3. Interact with individual customers4. Customize products, services, and

messages to each customer

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PARETO’S LAW 80:20 RULE20% of customer account for 80% of turn

over20% of customer account for 80% of

profit20% of customer account for 80% of all

your problems14

Acquisition

Retention

Sales analysi

s

merchandising

advertising

Customer segmentati

on

Campaign management

Channel support

Trust and privacy

Product quality

Customer service

Customer satisfaction

PotentialsProspectsFirst-time customersRepeat customersClientsMembersAdvocatesPartners

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Interact with customersDevelop loyalty programs

Frequency programs Club membership programs

Personalize marketingCreate institutional ties

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Loyalty is about the conscious decision of your customers to commit their continual repurchases to your brand. It is :

Driving an extra few miles to do your shopping Recommending it to your best friend An emotional and rational ‘lock-in’ Sometimes encouraged by an incentive or reward A better path to profit

Loyalty is essentially a one-way commitment for which the customer receives a reward, but it is also about relationships

Two-way interaction in which both sides create and exchange mutual benefits

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Satisfaction is important business success However, satisfaction itself is not the only thing

that delivers increased profits and a greater share of customer’s wallets

Satisfaction is only a feeling that is most likely to disappear quickly

Satisfaction alone isn’t adequate customer loyalty must combine with satisfaction for it to be effective

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Identify the best prospectsMatch a specific offer with a specific

customer as a way to sell, cross-sell, and up-sell

Deepen customer loyalty by remembering preferences and offering relevant incentives and information

Reactivate customer purchasingAvoid serious mistakes

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Large investmentDifficulty in getting everyone to be

customer orientedNot all customers want an ongoing

relationshipAssumptions behind CRM may not

always hold true

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High satisfaction

low satisfaction

Low loyalty High loyalty22

Customer database—an organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for marketing purposes.

Database marketing—the process of building, maintaining, and using customer databases and other databases to make contact, facilitate transactions, and build customer relationships.

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Data warehouse—organized data where marketers can capture, query, and analyze it to draw inferences about an individual customer’s needs and responses.

Datamining—statisticians extract useful information about individuals, trends, and segments from the mass of data.

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