CHAPTER 2 BUILDING CUSTOMER SATISFACTION VALUE AND RETENTION

CHAPTER 2 BUILDING CUSTOMER SATISFACTION, VALUE, AND RETENTION

Important Topics of This Chapter Customer value and satisfaction. n Delivering customer value and satisfaction. n Attracting and retaining the customers. n Total Quality Marketing. n

DEFINING CUSTOMER VALUE AND SATISFACTION n Total Customer Value: » » n monetary value Vs. perceived value Customer delivered value = total customer value(customer benefits) minus total customer cost(using and disposing the product/service). Customer satisfaction: performance (expected) after purchase. Therefore, Satisfaction = f(perceived performance). » Three conditions: » – – – below expectation, meet the expectations exceed expectations

CUSTOMER SATISFACTION (CONT. ) n Customer Satisfaction (cont. ): » » » n Total Customer Satisfaction(TCS) Loyalty Respond customer needs and attract new ones Monitor competitors performance It is a goal and marketing tool Problems: » identifying the reasons of dissatisfaction

DELIVERING CUSTOMER VALUE AND SATISFACTION n Value Chain System: » » » Benchmarking-cost and performance analysis Coordinated efforts of each department Core business process: n n New product, inventory management, ordering and customer service Value Delivery Network: » Partnership: n » EDI: n » Sears Wal Mart, Levi’s Quick response system: n Pulled by demand

Value Chain System Support Activities Infrastructure Human Resource Management Technology Development Procurement Inbound Operations Outbound Marketing Service Logistics and Sales Primary Activities

ATTRACTING AND RETAINING CUSTOMERS n Attracting Customers: » Customer acquisition: n n Cost of lost customers: » Surveys: n » Present value of the lost customer Customer retention: » » n AT&T, MCI Lifetime value: n n Lead generation Lead qualification Account conversion High switching barrier High customer satisfaction Relationship Marketing: » Looking for suspects to find prospects n Disqualified prospect: – Poor credit rating

ATTRACTING AND RETAINING CUSTOMERS » Relationship marketing (cont. ) n n n » qualified prospects into first time customers into repeat customers into clients into advocates into partnership. Levels of relationship: n n n Basic, Reactive Accountable Proactive Partnership. » adding financial benefits: n frequency marketing program, affinity groups. » adding social benefits: n personalizing customer relations. » adding structural ties: n computer connection.

CUSTOMER PROFITABILITY: THE ULTIMATE TESTS n n n 80/20 principle 80/20/30 principle large, small and mid-size customers » Profitable customers: – life time relationship. » Customer/product profitability analysis » The profit triangle: n creation high value with low cost: – Competitive advantage

TOTAL QUALITY MARKETING Edward Deming, American Statistician taught Japans the methodology of quality improvement n Malcolm Baldrige Award in the US focuses on satisfaction, quality, process, human resources, quality planning, information analysis and leadership. n European Quality Award similar to Baldridge award (ISO 9000) n

TOTAL QUALITY MARKETING (CONT. ) n Quality Improvement Programs(QIP)-PIMS » Quality Centered Company-Quality products and marketing excellence: n Requirements: – identifying needs and wants – communicating with R&D – timing – instruction and training – handle the complains – listen the advise for improvements.