Chapter 3 Building Customer Satisfaction Value and Retention

Chapter 3 Building Customer Satisfaction, Value, and Retention Power. Point by Karen E. James Louisiana State University - Shreveport © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 0

Objectives § Understand how companies deliver customer value and satisfaction. § Identify the factors that make a high performance business. § Understand how companies attract and retain customers. © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 1

Objectives § Realize how companies can improve both customer and company profitability. § Understand how companies can deliver total quality. © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 2

Customer Value § Customers seek to maximize value by – estimating which offer (product/firm) delivers the most value (CPV) – forming an expectation of value and acting upon it (purchase) – evaluating their usage experience against the expectations § Satisfaction results when expectations are equaled or surpassed © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 3

Customer Perceived Value § Perception of delivered value is a function of: – Total customer costs – Total customer value § Firms at a disadvantage must: – Reduce perceptions of costs or enhance perceptions of value © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 4

Customer Satisfaction § Satisfaction is defined as. . . “a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations. ” © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 5

Customer Satisfaction § To maximize satisfaction. . . – Don’t exaggerate the product / service’s capabilities in advertising or other communications l Dissatisfaction will result l FTC may become involved – Don’t set expectations too low l Market © 2003 Prentice Hall, Inc. size will be limited To accompany A Framework for Marketing Management, 2 nd Edition 6

High Performance Businesses Keys to Success § Stakeholders § Processes § Resources § Organization © 2003 Prentice Hall, Inc. § Identify several stakeholder groups for your University § How might the needs of these groups conflict with each other? To accompany A Framework for Marketing Management, 2 nd Edition 7

High Performance Businesses Keys to Success § New product development § Stakeholders § Customer attraction and retention § Processes § Order fulfillment § Resources § Reengineering work flows § Organization § Building cross functional teams © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 8

High Performance Businesses Keys to Success § Stakeholders § Processes § Resources § Organization © 2003 Prentice Hall, Inc. § Resources include labor, materials, machines, energy, and information § Outsourcing vs. ownership: Own and nurture competencies To accompany A Framework for Marketing Management, 2 nd Edition 9

High Performance Businesses Keys to Success § Stakeholders § Processes § Resources § Organization © 2003 Prentice Hall, Inc. § Organization refers to the organization’s policies, structures, and corporate culture § Corporate culture: shared experiences, stories, beliefs, and norms within an organization To accompany A Framework for Marketing Management, 2 nd Edition 10

Core Business Practices § Market Sensing § Customer Acquisition § Customer Relationship Management § Fulfillment Management § New Offering Realization © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 11

Customer Retention § Reducing customer churn (defection) is highly desirable – Define and measure retention rate – Identify causes of attrition – Estimate profit lost from customer defection (customer lifetime value) – Estimate cost to reduce defection; take appropriate action © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 12

Drivers of Customer Equity § Brand Equity § Relationship Equity § Value Equity © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 13

Strong Customer Bonds Keys to Success § Adding Financial Benefits § Frequency programs § Club memberships § Adding Social Benefits § Adding Structural Ties © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 14

Strong Customer Bonds Keys to Success § Adding Financial Benefits § Personalize customer relationships § Adding Social Benefits § Adding Structural Ties © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 15

Strong Customer Bonds Keys to Success § Adding Financial Benefits § Adding Social Benefits § Adding Structural Tie © 2003 Prentice Hall, Inc. § Create long-term contracts § Charge less for ongoing purchases § Link product to long-term service To accompany A Framework for Marketing Management, 2 nd Edition 16

20 – 80 – 30 Rule 20 20% of your customers 80 Generate 80% of your profit 30 Half of your profit is lost serving the bottom 30% of your customer base © 2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2 nd Edition 17