creating customer value and customer relationship

4. Creating Customer Value and Customer Relationships

AgendaDefining and delivering customer value, satisfaction, and loyalty.Lifetime value of customersCultivating strong customer relationshipsAttracting and retaining customersUnderstanding database marketing

Creating loyal customers is at the heart of every business.

The only value your company will create is the value that comes from customers the ones you have now and the ones you will have in the future Don Peppers and Martha Rogers

Organizational Charts

Customer Perceived ValueCustomer perceived value is the difference between the prospective customers evaluation of all the benefits and all the costs of an offering and the perceived alternatives.

Determinants of Customer Perceived ValueImage benefitPsychological costPersonal benefitEnergy costServices benefitTime costProduct benefitMonetary costTotal customer benefitTotal customer cost

Determinants of Customer Perceived Value

Steps in a Customer Value Analysis Identify major attributes and benefits that customers valueAssess the qualitative importance of different attributes and benefitsAssess the companys and competitors performances on the different customer values against rated importanceExamine ratings of specific segmentsMonitor customer values over time

What is Loyalty?Loyalty is 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.

Customer SatisfactionSatisfaction: A persons feelings of pleasure or disappointment that results from comparing a products perceived performance to expectations

Measuring SatisfactionPeriodic SurveysCustomer Loss RateMystery ShoppersMonitor Competitive Performance

Customer ComplaintsTip of the iceberg phenomenonGiven the potential downside of having an unhappy customer, its critical that marketers deal with customer complaints properly. Service recovery strategies

Product Satisfaction and QualitySatisfaction will also depend on product and service quality.

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

Maximizing Customer Lifetime ValueCustomer-Product Profitability Analysis

Measuring Customer Lifetime ValueAnnual customer revenue: Rs.500Average number of loyal years: 20Company profit margin: 10%Customer lifetime value: Rs.1000

Customer Relationship Management CRM is the process of carefully managing detailed information about individual customers and all customer touch points to maximize customer loyalty.

Framework for CRMIdentify prospects and customersDifferentiate customers by needs and value to companyInteract to improve knowledgeCustomize for each customer

Building a Relationship with Rural ConsumersChallenges due to lack of technology and resourcesPersonal relationship between buyer and seller for agesSBI Tiny initiative was aimed at starting a relationship with an eye on future profitsAadhaar offers home delivery of agri-inputs to villagers in busy sowing season

CRM StrategiesReduce the rate of defectionIncrease longevityEnhance share of walletTerminate low-profit customersFocus more effort on high-profit customers

Customer RetentionAcquisition of customers can cost five times more than retaining current customers.The average customer loses 10% of its customers each year.A 5% reduction to the customer defection rate can increase profits by 25% to 85%.The customer profit rate increases over the life of a retained customer.

The Customer Development ProcessProspectsSuspectsDisqualifiedFirst-timecustomersRepeatcustomersClientsMembersPartnersEx-customers

Database Key ConceptsCustomer databaseDatabase marketing

Business databaseData warehouseData mining

Using the DatabaseTo identify prospectsTo target offersTo deepen loyaltyTo reactivate customersTo avoid mistakes

Perils of CRMImplementing CRM before creating a customer strategyRolling out CRM before changing the organization to matchAssuming more CRM technology is betterStalking, not wooing, customers

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creating customer value and customer relationship