Creating Customer Value, Satisfaction,

and Loyalty

Prepared By,Mr. Nishant Agrawal

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?• How can companies both attract and retain

customers?• What is database marketing?

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Figure 5.1 Organizational Charts

What is Customer Perceived Value?

•Consumers are better educated and informed than ever

•Customer perceived value is the difference between

the prospective / future customer’s evaluation of all the

benefits and all the costs of an offering and the perceived

alternatives.

Determinants of Customer Perceived Value

Image benefit Psychological cost

Personnel benefit Energy cost

Services benefit Time cost

Product benefit Monetary cost

Total customer benefit Total customer cost

• TCB is perceived value of economic, functional and psychological benefits customer

expect from market offering.

• TCC is perceived bundle of costs customers expect to incur in evaluating , obtaining,

using given market offering , energy and psychological costs.

Steps in a Customer Value Analysis

1. Identify major attributes and benefits that customers

value

2. Assess the qualitative importance of different attributes

and benefits

3. Assess the company’s and competitor’s performances

on the different customer values against rated

importance

4. Examine ratings of specific segments

5. Monitor customer values over time

What is Loyalty?

Loyalty is a deeply held commitment to re-buy

a preferred product or service in the future

despite situational influences and marketing

efforts having the potential to cause switching

behavior.

The Value Proposition

The whole cluster of benefits the

company promises to deliver

Total Customer Satisfaction

• Satisfaction is person’s feeling of pleasure or

disappointment that result from comparing product’s

perceived performance to expectation.

• Performance falls short of expectation customer is dissatisfied.

• If it matches expectation customer is satisfied.

Measuring Satisfaction

Periodic Surveys

Customer Loss Rate

Monitor Competitive Performance

Single Key Question of Net Promoter“How likely is it that you would recommend

this product or service to a friend or colleague?”

Use 0-10-point scale 0-6 are Marketers than subtract Detractors

7-8 are deemed Passively satisfied9-10 are Promoter (Net Promoter Score-

NPS)

World class companies used NPS

Customer Satisfaction

Customer Loyalty

Company’s Profit

What is 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.

Marketing and Total Quality

Maximizing Customer Lifetime Value

Customer Profitability

Customer Equity

LifetimeValue

Customer-Product Profitability Analysis

What can company do for customer 2 & 3 ?

•It can raise the price of less profitable product or eliminate them

•It can try to sell customer 2 & 3 its profit making products.

Customer Lifetime Value(Formula Page No: 116)

• CLV described net present value of stream of

future profits expected over customer’s lifetime

purchase.

What is Customer Relationship Management?

• CRM is the process of carefully managing detailed

information about individual customers and all

customer touchpoints to maximize customer loyalty.

• CRM enables companies to provide excellent real time

customer service through effective use of individual

account information.

Personalizing Marketing

• It is about making sure the brand and its marketing are

relevant as possible to as many customer as possible – a

challenge , given that no two customers are identical.

• E commerce companies looking to attract and retain

customers are discovering that personalization goes beyong

creating customized information.

Framework for CRM

Identify prospects and customers (maintain your customer database)

Differentiate customers by needs & value to company

Interact to improve knowledge

Customize for each customer

Harrah’s targets

hundreds of segments

Reducing Defection

• It is not enough to attract new customer; company must also

keep them and increase business.

• Too many companies suffer from high customer churn or

defection.

• Ex. Telecom MNP introduce in India

• To Reduce defection rate companies must

• Define and measure defection rate

• Differentiate causes of customer attrition and identify those that can be

managed better

• Compare lost customer’s lifetime value to cost of reducing defection rate

Retention Dynamics (page No 122)

• Main steps in attracting and retaining customers in terms of

funnel and some questions to measure progress through the

funnel.

• The marketing funnel identifies the % of potential target market

at each stage in decision process, from merely aware to high

loyal.

• Customer must move through each stage to become loyal.

Managing the customer base

Reduce the rate of defection

Increase longevity

Enhance “share of wallet”

Terminate low-profit customers

Focus more effort on high-profit customers

Building Loyalty

• Creating a strong , tight connection to customer is dream of

any marketer and often the key to long term marketing

success.

• Following sections explain 3 types of marketing activities

companies are using to improve loyalty and retention.

1. Interacting with customers

2. Developing Loyalty Programs

3. Creating institutional Ties

Customer Retention

• Acquisition 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.

Figure 5.5 The Customer Development Process

Prospects

Suspects

Disqualified

First-timecustomers

Repeatcustomers Clients Members

PartnersEx-customers

Creating Customer Evangelists

Steps for Creating Customer Evangelists

• Customer plus-delta• Napsterize your knowledge• Build the buzz• Create community• Make bite-size chunks• Create a cause

Database Key Concepts

• Customer database

• Database marketing

• Mailing list

• Business database

• Data warehouse

• Data mining

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 cost of gathering information is too high

Perils of CRM

• Implementing CRM before creating a customer

strategy

• Rolling out CRM before changing the organization to

match

• Assuming more CRM technology is better

• Stalking, not wooing, customers

Marketing Debate Online vs. Offline Privacy?

Take a position:1. Privacy is a bigger issue in the online world than in the offline world.

or

2. Consumers receive more benefit than risk from marketers knowing their personal information.

Marketing Discussion

Choose a business and show howyou would go about developing a quantitative formulation that capturesthe concept of customer lifetime value.

Assignments

1. What are the techniques used for monitoring customer satisfaction?