Market-Based
Management, 4th
edition
Customer Focus and
Managing Customer Loyalty
Chapter One
Customer Focus and
Managing Customer Loyalty
Chapter One
• Market orientation and customer focus
• The importance of customer satisfaction,
retention, and loyalty
• Building a measure of customer loyalty
• Customer relationship management
• Marketing knowledge
1-2
Weak Customer Focus
1-3
Strong Customer Focus
Insert figure 1.2 here
1-4
Customer Satisfaction
• Measuring Customer
Satisfaction
– Customer Satisfaction
Index (CSI)
• Why is it important?
– Directly correlated to
profits
– Leading indicator of
operating performance
• Impact of Dissatisfied
Customers
1-5
Customer Satisfaction and
Retention
• Why is customer
retention important?
– Cost of
replacing/maintaining
customers
– Lifetime value of a
customer
• How does a firm retain
customers?
– Encouraging complaints
1-6
Measuring Customer
Retention
1-7
Customer Loyalty
• Why is it important?
– Customer
Recommendations
• Measuring
Customer Loyalty
– Customer Loyalty
Index (CLI)
1-8
Customer Relationship
Management
• Why is CRM important?
– Not all customers are
desirable
• New Customer vs.
Win-Back Customer
• Goal of CRM
– Build Customer Loyalty
• Classification of
Customers
–
–
–
–
High Potentials
Top Performers
Non Profits
Underachievers
1-9
Customer Relationship
Management
1-10
Marketing Orientation
Three Pillars of
Marketing Orientation:
Three Drivers of
Marketing Orientation:
• Customer Focus
• Marketing Knowledge
• Competitor Orientation
• Marketing Leadership
• Team Approach
• Employee Satisfaction
1-11
Marketing Orientation and
Marketing Knowledge
1-12
Marketing Excellence Survey
1-13
Takeaways/Review
•
•
•
•
•
•
Customer Focus
Market Orientation
Customer Satisfaction
Customer Retention
Customer Loyalty
Key Performance
Metrics
• Customer Relationship
Management (CRM)
• Marketing Knowledge
• Exercises
– Marketing Performance
Tools
– Profit impacts of
retention, exit, and
satisfaction
1-14
Marketing Performance
Tools
Customer Satisfaction and Customer Profitability
Custom er
CSI
Annual
Percent
Gross
Percent
Score
Sales
Margin
Profit
Cost
Profit
Very Satisfied
25%
100
$1,500
60%
$900
$100
$800
Satisfied
36%
80
$500
50%
$250
$100
$150
Somew hat Satisfied
22%
60
$250
50%
$125
$100
$25
Somew hat Dissatisfied
10%
40
$150
40%
$60
$100
($40)
Dissatisfied
5%
20
$75
40%
$30
$100
($70)
Very Dissatisfied
2%
0
$50
40%
$20
$100
($80)
100%
72
$630
Custom er Satisfaction
$350
Retention Custom er
$250
1-15
Marketing Performance
Tools
Customer Retention and Customer Loyalty
Custom er
CSI
Percent
Score
Very Satisfied
25%
100
0.95
0.90
86
Satisfied
36%
80
0.80
0.75
48
Somew hat Satisfied
22%
60
0.50
0.50
15
Somew hat Dissatisfied
10%
40
0.10
0.00
0
Dissatisfied
5%
20
0.10
0.00
0
Very Dissatisfied
2%
0
0.00
0.00
0
100%
7200%
0.65
Custom er Satisfaction
Pecent
% Who Would Custom er
Repurchase Recom m end
Loyalty
42
1-16
Marketing Performance
Tools
Lifetime Value of a Customer
Customer Retention
67%
Customer Life
3.0
Year
0
Customer Margin
Acqusition Cost
2
3
4
5
6
7
8
9
10
$250
$250
$250
($70)
($70)
($70)
$180
$180
$180
$0
$0
$0
$0
$0
$0
$0
($350)
Retention Cost
Net Profit
1
($350)
Discount Rate
20%
Present Value Multiplier
1.000
0.833
0.694
0.579
0.482
0.402
0.335
0.279
0.233
0.194
0.162
Net Present Value
($350)
$150
$125
$104
$0
$0
$0
$0
$0
$0
$0
Life Time Value of Customer
$29.17
1-17