




Types of Customer Value
Customer Perceived Value
Satisfaction
Loyalty
Customer Satisfaction and Marketing
Performance



The difference between the prospective
customer’s evaluation of all the benefits and
all the costs of an offering and the perceived
alternatives
Determinants of Customer Perceived Value
Hierarchies of Values (Means-end Chains)
Customer
Perceived
Value
Total customer value
Total customer cost
Economic benefit
Monetary cost
Functional benefit
Time cost
Psychological benefit
Effort cost
Psychological cost
Means-end chain for Belgian meat consumption
Satisfaction and Loyalty
Expectations
=
>
<
Performance
Satisfaction
Loyalty
(Repurchase)

A deeply held commitment to re-buy or
repatronize a preferred product or service in
the future despite situational influences and
marketing efforts having the potential to
cause switching behavior
Satisfaction and Loyalty (Commitment)
Satisfaction
Commitment
Repurchase
Satisfaction and Loyalty (Commitment)
Satisfaction
?
Commitment
Repurchase
?
Satisfaction and Loyalty (Commitment)
Satisfaction
Quality of
Alternatives
Commitment
Repurchase
?
Satisfaction and Loyalty (Commitment)
Satisfaction
Quality of
Alternatives
Commitment
Repurchase
Investments in the
Relationship

A Key Marketing Performance Metric
Satisfaction measured on a six-point scale like the one
presented below.
Based on this scale we can create a Customer Satisfaction Index
ranging from 0 to 100.
Very
Dissatisfied Somewhat
Dissatisfied
Dissatisfied
0
20
40
Somewhat
Satisfied
Satisfied
Very
Satisfied
60
80
100
The Customer Satisfaction Index gives you an idea on how
satisfied the customers are on average.
Lets assume 10 respondents: 1:0, 2:5, 3:2, 4:4, 5:4, 6:5, 7:5, 8:4,
9:4, 10:3= SUM: 31, Average: 3.1, what about the index?
All very satisfied: SUM:50; average:5, Index set to 100
All very dissatisfied: SUM:0; average:0, Index set to 0
All satisfied: SUM:40, average:4, Index set to 80
(SUM/(Max scale point x N))x100=Index score, in our example:
31/50 x 100 = 62
Customer Satisfaction
40
35
30
25
20
15
10
5
0
%
%
%
%
%
%
%
%
%
0.35
0.15
0.02
0.03
0.2
0.25
Customer
Satisfaction
Customer
Percent
Customer
Sales
Very
Satisfied
25%
$1,200
60%
$720
$100
$620
Satisfied
35%
$800
50%
$400
$100
$300
Somewhat
Satisfied
20%
$300
40%
$120
$100
$20
Somewhat
Dissatisfied
15%
$80
40%
$32
$100
-$68
Dissatisfied
3%
$60
40%
$24
$100
-$76
Very
Dissatisfied
2%
$50
40%
$20
$100
-$80
$655
48.5%
$350
$100
$350
Weighted
Average
Percent
Margin
Gross
Profit
Retention
Cost
Customer
Profit
$ 700
$620.00
$ 600
$ 500
$ 400
$ 300
$300.00
Average: $250
$ 200
$ 100
$20.00
$0
-$ 100
-$80.00 -$76.00 -$68.00
Retained
95%
Satisfied
70% (140,000)
Do Complain
10%(6,000)
Customer
Base
200,000
Dissatisfied
30% (60,000)
Don’t Complain
90% (54,000)
Not retained
5%
-7,000
Retained
90%
5,400
Not Retained
10%
-600
Retained
22%
Not Retained
78%
New Customers Needed
24.86%
133,000
11,800
-42,120
49,720
Customer Performance
Retained
Customers
75%
Lost
Customers
New
Customers
# of Customers
150,000
-50,000
50,000
Revenue per C.
$800
$200
$400
Sales Revenue (millions)
$120
$10
$20
$150
50%
25%
25%
43.8%
$400
$50
$100
$60.0
$2.5
$5.0
$60
$60
$300
$9.00
$3.00
$15.00
$27.0
$51.00
-$0.50
-$10.00
$40.5
Percent Margin
Margin per C.
Gross Profit (millions)
Marketing Expense per C.
Marketing Expenses (mill.)
Net Marketing
Contribution (millions)
Operating Expenses
(millions)
Net Profit Before Taxes
Overall
Performance
200,000
$67.5
$33.0
$7.5
Customer Performance
Retained
Customers
80%
Lost
Customers
New
Customers
# of Customers
160,000
-40,000
40,000
Revenue per C.
$800
$200
$400
Sales Revenue (millions)
$128
$8
$16
$152
50%
25%
25%
43.8%
$400
$50
$100
$64.0
$2.0
$4.0
$65
$65
$300
Marketing Expenses (mill.)
$10.40
$2.60
$12.00
$25.0
Net Marketing
Contribution (millions)
$53.60
-$0.60
-$8.00
$45.0
Percent Margin
Margin per C.
Gross Profit (millions)
Marketing Expense per C.
Overall
Performance
200,000
$70.0
Operating Expenses
(millions)
$33.0
Net Profit Before Taxes
$12.0
 “The
gulf between satisfied and
completely satisfied customers
can swallow a business” (Jones
and Sasser, 1994.)
Einar.breivik@ttu.edu
7/8/2010
Definitely
Will Not
Repurchase
Will Not
Repurchase
Probably
Will Not
Repurchase
Probably
Will
Repurchase
Intention to Repurchase
Plan to
Repurchase
Percent
Definitely
Will
Repurchase
Probability
Definitely Will Repurchase
25%
1.00
Plan to Repurchase
35%
.80
Probably Will Repurchase
20%
.60
Probably Will Not Repurchase
15%
.40
Will Not Repurchase
3%
.20
Definitely Will Not Repurchase
2%
0.00
Total: 100%
Customer Retention
.72
72%
Customer Life (purchase periods)
20
Customer Life (N)
15
(given rate of customer retention)
N
10
1
1  CR
CR = Customer Retention Rate
5
0
50 % 55 % 60 % 65 % 70 % 75 % 80 % 85 % 90 % 95 %
Retention rate
Average Profit per Credit
Card Customer
$80
$60
$40
$30
$49
$42 $44
$55
Period
$20
$0
-$20
0
1
2
3
4
5
-$40
-$60
-$51
PV=1/(1+DR)N
0
1
2
Present
Present Value of
Cash Value of Cash
Flow
$1
Flow
-$51
$30
$42
1.00
.909
.826
-$51,00
$27.30
$34.70
3
$44
.751
4
$49
.683
5
$55
.621
Net Present Value of Cash Flow
$33.00
$33.50
$34.20
$111.70



Kotler, P. & K.L. Keller: Ch. 2 & Ch. 4
Holbrook, M.B. (1999): Introduction to
Consumer Value, in Consumer Value: A
Framework for Analysis and Research,
London: Routledge, 1-28
Best, Roger J. (2009): Market-Based
Management: Strategies for Growing
Customer Value and Profitability, 5th ed.,
Pearson Prentice Hall, New Jersey (ISBN-13:
978-0-13-233653-6)