5 Creating Customer Value Satisfaction and Loyalty Marketing

5 Creating Customer Value, Satisfaction, and Loyalty Marketing Management, 13 th ed

Figure 5. 1 Organizational Charts Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -2

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 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -3

What is Loyalty? Loyalty is a deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -4

The Value Proposition The whole cluster of benefits the company promises to deliver Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -5

Measuring Satisfaction Periodic Surveys Customer Loss Rate Mystery Shoppers Monitor Competitive Performance Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -6

J. D. Power Rates Customer Satisfaction Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -7

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. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -8

Maximizing Customer Lifetime Value Customer Profitability Customer Equity Lifetime Value Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -9

Estimating Lifetime Value • • Annual customer revenue: $500 Average number of loyal years: 20 Company profit margin: 10 Customer lifetime value: $1000 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -10

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. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -11

Framework for CRM Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge Customize for each customer Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -12

CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet” Terminate low-profit customers Focus more effort on high -profit customers Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -13

Customer Retention • Acquisition of customers can cost five 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. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -14

Figure 5. 5 The Customer Development Process Suspects Prospects First-time customers Disqualified Repeat customers Clients Ex-customers Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Members Partners 5 -15

Creating Customer Evangelists Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -16

Database Key Concepts • Customer database • Database marketing • Mailing list • Business database • Data warehouse • Data mining Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -17

Using the Database To identify prospects To target offers To deepen loyalty To reactivate customers To avoid mistakes Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 5 -18