MKT 601 Chapter 03 Creating Longterm Loyalty Relationships

MKT: 601 Chapter 03: Creating Long-term Loyalty Relationships MKT 601, CH-03, MNH 1

Building Customer Value, Satisfaction, and Loyalty Customer Perceived Value Defining Value/ total Customer Benefit and Total Customer Cost Applying Value concept Steps for Customer value Analysis • 1. Identify the major attributes and benefits customers’ value • 2. Assess the quantitative importance of the different attributes and benefits. • 3. Assess the company’s and competitors’ performances on the different customer values against their rated importance. • 4. Examine how customers in a specific segment rate the company’s performance against a specific major competitor on an individual attribute or benefit basis. If the company’s offer exceeds the competitor’s offer on all important attributes and benefits, the company can charge a higher price (thereby earning higher profits), or it can charge the same price and gain more market share. • 5. Monitor customer values over time. MKT 601, CH-03, MNH 2

Delivering High Customer Value Loyalty • Value proposition (all the benefits that company promised) • Value delivery system (experience of customers for obtaining the product) Total Customer satisfaction Monitoring satisfaction Measurement techniques: • Periodic survey • Customer loss rate • Mystery shoppers MKT 601, CH-03, MNH 3

• Influence of Customer Satisfaction • Product and Service 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. • Impact of Quality • Maximizing customer Lifetime value • Customer Profitability Analysis/Activity Based Costing MKT 601, CH-03, MNH 4

MKT 601, CH-03, MNH 5

Measuring Customer Lifetime Value Attracting and retaining Customers Reducing defection • Define and measure its retention rate • Distinguishes the causes of customer attrition and identify those can be managed better • Compare the lost profit equal to the customer’s lifetime value from a lost customer to the cost to reduce the defection rate The Marketing Funnels MKT 601, CH-03, MNH 6

• Acquiring new customers can cost five times more than satisfying and retaining current ones. It requires a great deal of effort to induce satisfied customers to switch from their current suppliers. • The average company loses 10 percent of its customers each year. • A 5 percent reduction in the customer defection rate can increase profits by 25 percent to 85 percent, depending on the industry. • Profit rate tends to increase over the life of the retained customer due to increased purchases, referrals, price premiums, and reduced operating costs to service. MKT 601, CH-03, MNH 7

MANAGING THE CUSTOMER BASE • Reducing the rate of customer defection • Increasing the longevity of the customer relationship. • Enhancing the growth potential of each customer through “share of wallet, ” crossselling, and up-selling • Making low-profit customers more profitable or terminating them • Focusing disproportionate effort on high-profit customers • Building loyalty INTERACTING WITH CUSTOMERS Forming Strong Customer Bonds • Create superior products, services, and experiences for the target market. • Get cross-departmental participation in planning and managing the customer satisfaction and retention process. • Integrate the “Voice of the Customer” to capture their stated and unstated needs or requirements in all business decisions. • Organize and make accessible a database of information on individual customer needs, preferences, contacts, purchase frequency, and satisfaction. • Make it easy for customers to reach appropriate company staff and express their needs, perceptions, and complaints. • Assess the potential of frequency programs and club marketing programs. • Run award programs recognizing outstanding MKT 601, CH-03, MNHemployees. 8

Develop loyalty programs • Frequency programs (FPs) • Club membership program Create Institutional Ties Brand Communities Types of Brand Communities Maximizing the Benefits of Brand Communities Maximizing online brand communities effectiveness • Enhance the timeliness of information exchanged • Enhance the relevance of information posted • Extend the conversation • Increase the frequency of information exchanged Win Backs Cultivating Customer Relationships Customer Relationship Management Personalizing marketing Customer Empowerment Customer Reviews and Recommendations Customer Complaints MKT 601, CH-03, MNH 9

Recovering Customer goodwill • Hotline number • Contact complaining customer ASAP • Accept responsibility for the customer’s disappointment: don’t blame • Use empathic people • Resolve the complaint swiftly MKT 601, CH-03, MNH 10