Creating Customer Value,

5Creating Customer Value,

Satisfaction, and Loyalty

Mr. Ajit Arya

Faculty-Marketing

Department of Business Studies

C. U. Shah College of Engg. & Tech.

Chapter Questions

• What are customer value, satisfaction, and

loyalty, and how can companies deliver them?

• What is the lifetime value of customers?

• How can companies cultivate strong customer

relationships?relationships?

• How can companies both attract and retain

customers?

• What is database marketing?

“The only value your company will ever create is

the value that comes from customers – the ones

you have now and the ones you will have in the

future. Businesses succeed by getting, keeping,

and growing customers. Customers are the onlyand growing customers. Customers are the only

reason you build factories, hire employees,

schedule meeting, etc. Without customers, you

don’t have a business.”

HDFC Offers an Assortment of

Services to Satisfy its Customers

Organizational Charts

What is Customer Perceived Value?

Customer perceived value is the difference between the prospective

customer’s evaluation of all the benefits and all the costs of an offering and the and all the costs of an offering and the

perceived alternatives.

Determinants of Customer Perceived Value

Product benefit Monetary cost

Total customer benefit Total customer cost

Image benefit Psychological cost

Personal benefit Energy cost

Services benefit Time cost

Product benefit Monetary cost

Steps in a Customer Value Analysis

• Identify major attributes and benefits thatcustomers value

• Assess the qualitative importance of differentattributes and benefits

• Assess the company’s and competitor’s• Assess the company’s and competitor’sperformances on the different customer valuesagainst rated importance

• Examine ratings of specific segments

• Monitor 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 situational influences and marketing efforts having the potential to cause

switching behavior.

Top Brands in Customer Loyalty

1. Avis

2. Google

3. L.L. Bean

4. Samsung

7. Land’s End

8. Coors

9. Hyatt

10.Marriott4. Samsung

5. Yahoo!

6. Canon (office

copiers)

10.Marriott

11.Verizon

12.KeySpan Energy

13.Miller Genuine Draft

14.Amazon

The Value Proposition

The whole cluster of

benefits the

company promises company promises

to deliver

What is Satisfaction?

Satisfaction is a person’s feelings of pleasure or disappointment that result from comparing a product’s perceived

performance or outcome to their performance or outcome to their expectations.

Measuring Satisfaction

Periodic Surveys

Customer Loss Rate

Mystery Shoppers

Monitor Competitive

Performance

What is Quality?

Quality is the totality of features and

characteristics of a product or

service that bear on its

ability to satisfyability to satisfy

stated or implied needs.

Impact of Quality

• Product and service quality customer satisfaction company profitability

• Quality is the key to value creation and • Quality is the key to value creation and customer satisfaction.

Maximizing Customer Lifetime Value

Customer

ProfitabilityProfitability

Customer

Equity

Lifetime

Value

Estimating Lifetime Value

• Annual customer revenue: Rs.500

• Average number of loyal years: 20

• Company profit margin: 10%• Company profit margin: 10%

• Customer lifetime value: Rs.1000

Customer-Product Profitability Analysis

What is Customer Relationship

Management?

CRM is the process of carefully managing detailed information about individual customers and all customer

touchpoints to maximize touchpoints to maximize customer loyalty.

Framework for CRM

Identify prospects and customers

Differentiate customers by needs

and value to companyand value to company

Interact to improve knowledge

Customize for each customer

CRM Strategies

Reduce the rate of defection

Increase longevity

Enhance “share of wallet”

Terminate low-profit

customers

Focus more effort on

high-profit customers

Focus Focus on

CRM

Customer Retention

• Acquisition of customers can cost five times

more than retaining current customers.

• The average customer loses 10% of its

customers each year.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 Process

Prospects

Suspects

Disqualified

First-time

customersRepeat

customers Clients Members

PartnersEx-customers

Building Loyalty

• Interacting with customers

• Developing loyalty programs (FPs, Club

member)

• Personalizing marketing• Personalizing marketing

• Creating institutional ties

• Win - Backs

Database Key Concepts

• Customer database

• Database

• Business database

• Data warehouse• Database marketing

• Mailing list

• Data warehouse

• Data mining

Customer Database

Customer database is an organized

collection of comprehensive information

about individual customers or prospects

that is current, accessible, and that is current, accessible, and

actionable for such marketing purposes

as lead generation, sale of a product or

service, or maintenance of customer

relationships.

Using the Database

To identify prospects

To target offers

To deepen loyalty

To reactivate customers

To avoid mistakes

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 unit sale is very small

• The cost of gathering information is too high

Thank You!!!Thank You!!!