MARKETING MANAGEMENT
Creating
Customer Value,
Satisfaction, and
Loyalty
5-1
Chapter Questions
• What is customer satisfaction, and loyalty?
• How can companies deliver value,
satisfaction, and loyalty?
• What is the lifetime value of customers?
• How can companies both attract and retain
customers?
5-2
The Value Proposition
The cluster of benefits the
company promises to deliver
5-3
Measuring Satisfaction
Periodic Surveys
Customer Loss Rate
Competitive performance
5-4
Loyalty
A commitment to re-buy
or re-patronize a product
or service in the future.
5-5
Building Loyalty
Partnership
Proactive
Accountable
Reactive
Basic
5-6
Maximizing Customer Lifetime Value
Customer
Profitability
Customer
Equity
Lifetime
Value
5-7
Customer-Product Profitability Analysis
5-8
Estimating Lifetime Value
• Annual customer revenue: $500
• Average number of loyal years: 20
• Company profit margin: 10
• Customer lifetime value: $1000
5-9
Framework for CRM
Identify prospects and customers
Differentiate customers by needs
and value to company
Interact to improve knowledge
Customize for each customer
5-10
CRM Strategies
Reduce the rate of defection
Increase longevity
Enhance “share of wallet”
Terminate low-profit
customers
Focus more effort on
high-profit customers
5-11
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.
5-12
Forming Strong Customer Bonds
Add financial
benefits
Add social
benefits
Add structural
ties
5-13