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5Creating Long-TermLoyalty Relationships
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Chapter Questions
What are customer value, satisfaction, andloyalty, and how can companies deliver them?
What is the lifetime value of customers andhow can marketers maximize it?
How can companies attract and retaincustomers and cultivate strong customerrelationships?
What are the pros and cons of databasemarketing?
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Harrah’s Builds Relationships
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Figure 5.1 Customer-Orientations
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Dell ReestablishedIts Commitment to Value
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What isCustomer Perceived Value?
Customer perceived value is thedifference between the prospectivecustomer’s evaluation of all the benefitsand all the costs of an offering and theperceived alternatives.
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Figure 5.2 Determinants ofCustomer Perceived Value
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Image benefit Psychological cost
Personal benefit Energy cost
Services benefit Time cost
Product benefit Monetary cost
Total customer benefit Total customer cost
Caterpillar MaximizesCustomer Value
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Steps in aCustomer Value Analysis
Identify major attributes and benefits thatcustomers value
Assess the qualitative importance of differentattributes and benefits
Assess the company’s and competitor’sperformances on the different customer valuesagainst rated importance
Examine ratings of specific segments Monitor customer values over time
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Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-10
What is Loyalty?
Loyalty is a deeply held commitment to re-buy or re-patronize a preferred product or
service in the future despite situationalinfluences and marketing efforts having the
potential to cause switching behavior.
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Top Brands in Customer Loyalty
Apple iPhone Clairol Samsung Mary Kay Grey Goose Clinique Avis Wal-Mart
Google Amazon Bing J.Crew AT&T Wireless Discover Card Verizon Wireless Cheerios
Establishing Value
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Measuring Satisfaction
Periodic surveys Customer loss rate Mystery shoppers Monitor competitive performance
Managing Customers
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What is Quality?
Quality is the totality of features andcharacteristics of a product or
service that bear on itsability to satisfy
stated or implied needs.
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Maximizing Customer Lifetime Value
Customer Profitability
Customer Equity
Lifetime Value
Figure 5.3 Customer-ProductProfitability Analysis
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Estimating Lifetime Value
Annual customer revenue: $500 Average number of loyal years: 20 Company profit margin: 10 Customer lifetime value: $1000
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What isCustomer Relationship Management?
CRM is the process of carefully managingdetailed information about individual
customers and all customer touch points tomaximize customer loyalty.
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Framework for CRM
Identify prospects and customers Differentiate customers by needs and value to
company Interact to improve knowledge Customize for each customer
Amy’s Maximized Word of Mouth
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Attracting andRetaining Customers
Reduce the rate of defection Increase longevity Enhance share of wallet Terminate low-profit customers Focus more effort on high-profit customers
Figure 5.4 The Marketing Funnel
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Loyalty Programs
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Database Key Concepts
Customer database Database marketing Mailing list
Business database Data warehouse Data mining
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Using the Database
To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes
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Don’t Build a Database When
The product is a once-in-a-lifetime purchase Customers do not show loyalty The unit sale is very small The cost of gathering information is too high
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For Review
What are customer value, satisfaction, andloyalty, and how can companies deliver them?
What is the lifetime value of customers andhow can marketers maximize it?
How can companies attract and retaincustomers and cultivate strong customerrelationships?
What are the pros and cons of databasemarketing?
Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-28
