Marketing Management
Building Customer Satisfaction,
Value, and Retention
Dr. Zafer Erdogan
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Kotler on
Marketing
It is no longer
enough to satisfy
customers. You
must delight them.
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Defining Customer Value and Satisfaction
• Customer Perceived Value (CPV)
– Difference between
• Total customer value
– Total monetary value of economic,
functional and psychological benefits
associated with a product offering
• Total customer cost
– Total cost of evaluating, obtaining,
using, and disposing of a given
product offering
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Figure 3.1:
Determinants of
Customer Delivered
Value
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Defining Customer Value and Satisfaction
• Total Customer Satisfaction
– Satisfaction-feelings of pleasure or disappointment
– Expectations vs. perceived performance
• Customer Expectations
– Formed by past experiences, friends’, marketers’,
competitors’ information and promises
• Delivering High Customer Value
– Value proposition-whole cluster of promises offered
– Value-delivery system-communications and
channel experiences offered to customers
• Measuring Satisfaction
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Tools for Tracking and Measuring Customer Satisfaction
Complaint and A customer-centered organization makes it easy for
customers to register suggestions and complaints. Some
suggestion
customer-centered companies establish hot lines with tollsystems:
free numbers. Companies are also using Web sites and
e-mail for quick, two-way communication.
Customer
satisfaction
surveys:
Ghost
Shopping:
Although customers are dissatisfied with one out of every
four purchases, less than 5 percent will complain. Most
customers will buy less or switch suppliers. Responsive
companies measure customer satisfaction directly by
conducting periodic surveys.
Hire people to pose as potential buyers and report on
positive and negative experiences.
Lost customer Contacting customers that have switch to competitors’
offerings and learn why this has happened
analysis
See text for complete table
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Delivering Customer Value and Satisfaction
In a hypercompetitive environment of these days, winning
companies need to create and deliver superior value.
Value Chain (Michael Porter)
– Every firm is a collection of activities
– Primary activities: inbound logistics-operationsoutbound logistics-marketing and sales-services
– Support activities: procurement-tech developmentHRM-firm infrastructure
The task is to examine costs and performances of each
value-creating activity and look for ways to improve it.
Benchmarking-Best of class practices of best companies
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Figure 3.3: The Generic Value Chain
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Delivering Customer Value and Satisfaction
The firms success depends not only each dept
performance but also how well they are
coordinated
Usually, every dept cares their interest not the firm’s
Solution!
Emphasis on Core Business Processes such as
–
–
–
–
The market sensing process
The new offering realization process
The customer acquisition process
The customer relationship
management process
– The fulfillment management process
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Delivering Customer
Value and Satisfaction
The Value Delivery Network
(Supply Chain)
– Companies need to look
beyond their operations to
gain competitive advantage
– by partnering with their
suppliers and distributors to
create superior Supply
Chain
Levi Strauss’s ValueDelivery Network
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Attracting and Retaining Customers
• Partner relationship
management (PRM)
– Implies working with partners
• Customer relationship
management (CRM)
– Process of managing detailed info about each
customer and carefully managing all the
customer “touch-points” with the aim of
maximizing their loyalty.
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Attracting and Retaining Customers
• Attracting Customers
• Computing the Cost of Lost Customers
– Customer churn, gain customers only
to lose many others like adding water to a
leaking pot
– Customer defection rate, the rate at
which companies lose customers
– Lifetime value, the present value of the
profit stream could have been realized if
the customer had not defected
prematurely.
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Attracting and Retaining Customers
• Measuring Customer Lifetime Value (CLV)
CLV=Annual customer revenue (x) Av. number of
loyal years (x) company profit margin
• So, do we need for Customer Retention?
• Yes!
– Acquiring a new customer costs 5 times more
– The average company loses 10% of its customers
– 5% reduction in the defection rate can increase
profits by 25-85%
– The customer profit rate tends to increase over the
life of the retained customer
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VIDEO CASE: CUT IT OUT
Please read the case before coming to
class which is on p.88 !..
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