MARKETING MANAGEMENT14th edition

5 Creating

Customer Value, Satisfaction, and

Loyalty

Kotler Keller

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Value and Satisfaction

•Perceived Value– The customer’s evaluation of the difference

between benefits and costs.– Customers often do not judge values and

costs accurately or objectively.

•Customer Satisfaction– Product’s perceived performance relative to

customer’s expectations.

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Determinants of Customer Perceived Value

Image benefit Psychological cost

Personal benefit Energy cost

Services benefit Time cost

Product benefit Monetary cost

Total customer benefit Total customer cost

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Determinants of Customer-Delivered Value

Customer-delivered

value

Total customer

value

Total customer

cost

Product value

Monetarycost

Personalvalue

Energycost

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Loyalty

A deeply held commitment to re-buyor 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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The Value Proposition

The whole cluster of benefits thecompany promises to deliver

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Measuring Satisfaction

Periodic SurveysPeriodic Surveys

Customer Loss RateCustomer Loss Rate

Mystery ShoppersMystery Shoppers

Monitor competitive performance

Monitor competitive performance

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Product and Service Quality

Quality is the totality of features andcharacteristics of a product or

service that bear on its ability to satisfy

stated or implied needs.

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Total Quality Management

TQM is an organization-wide approach to continuously improving the quality of

all the organization’s processes, products, and services.

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Maximizing Customer Lifetime Value

Customer Profitability

Customer Equity

LifetimeValue

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Customer-Product Profitability Analysis

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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

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CRM Strategies

Reduce the rate of defectionReduce the rate of defection

Increase longevityIncrease longevity

Enhance “share of wallet”Enhance “share of wallet”

Terminate low-profit customers

Terminate low-profit customers

Focus more effort on high-profit customersFocus more effort on high-profit customers

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Mass vs. One-to-One Marketing

Mass• Average customer• Customer anonymity• Standard product• Mass production• Mass distribution• Mass advertising• One-way message• Economies of scale

One-to-One• Individual customer• Customer profile• Customized market

offering• Customized

production• Economies of scope• Share of customer

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Customer Retention

• Acquisition of customers can cost 5 times more than retaining current customers.

• The average company 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 Marketing Funnel

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The Customer-Development Process

Prospects

Suspects

Disqualified

First-timecustomers

Repeatcustomers Clients Members

PartnersEx-customers

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Building Loyalty

Partnership

Proactive

Accountable

Reactive

Basic

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Forming Strong Customer Bonds

Add financialbenefits

Add socialbenefits

Add structuralties