5
Creating Customer Value,
Satisfaction,
and Loyalty
Marketing Management, 13th ed
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
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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 perceived
alternatives.
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Figure 5.2 Determinants of
Customer Perceived Value
Total customer benefit
Total customer cost
Product benefit
Monetary cost
Services benefit
Time cost
Personal benefit
Energy cost
Image benefit
Psychological cost
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Steps in a Customer Value Analysis
• Identify major attributes and benefits
that customers value
• Assess the qualitative importance of
different attributes and benefits
• Assess the company’s and competitor’s
performances on the different customer
values against rated importance
• Examine ratings of specific segments
• Monitor customer values over time
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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.
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What is Satisfaction?
Is a persons feelings of pleasure
or disappointment that result from
comparing products perceived
performance (out come) to their
expect.
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Top Brands in Customer Loyalty
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Avis
Google
L.L. Bean
Samsung (mobile
phones)
• Yahoo!
• Canon (office
copiers)
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•
•
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Land’s End
Coors
Hyatt
Marriott
Verizon
KeySpan Energy
Miller Genuine Draft
Amazon
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Measuring Satisfaction
• Periodic surveys: contact satisfaction
customer directly and ask them about
their intention to rebury
• Customer loss rate: contact the
customers who stop buying
• Hire mystery shoppers: report about
strong and week points of buying
company and competitors products
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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.
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Maximizing Customer Lifetime Value
• Customer profitability: 20-80 rule
• Customer equity :the total asset value of the
relationships which an organization has with its
customers. Customer equity is based on customer
lifetime value, and an understanding of customer
equity can be used to optimize the balance of
investment in the acquisition and retention of
customers. It is also known as customer capital and
forms one component of the intellectual capital of an
organization.
• Lifetime value:
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Figure 5.4 Customer-Product
Profitability Analysis
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Estimating Lifetime Value
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Annual customer revenue: $500
Average number of loyal years: 20
Company profit margin: 10
Customer lifetime value: $1000
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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.
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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
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Reduce the rate of defection
Increase longevity
Enhance share of wallet
Terminate low-profit customers
Focus more effort on high-profit
customers
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Customer Retention
• Acquisition of customers can cost 5 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.
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Steps for Creating
Customer Evangelists (missionary)
• Customer plus-delta: Gather their ideas
• Napsterize your knowledge: release your
own knowledge data into network
• Build the buzz; keep them talking by
providing them tools programs and features
• Create community; Likeminded customers
• Make bite-size chunks; sponsoring charity
events
• Create a cause; supporting freedom
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Database Key Concepts
• Customer database:
• Business database;
comprehensive
business customers
information's about
• Data warehouse;
customers
telemarketing could
• Database marketing
response
;building maintaining
• Data mining;
and using customer
marketing statisticians
database
• Mailing list: Names ,list,
tel.n
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Using the Database
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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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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
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