Building Customer

Satisfaction Value and

Retention
DR. SHAZIA KHAN
ASSO. PROFESSOR
ITM BUSINESS SCHOOL
 Customer Value,

CPV,

CLV,
Sub-topics
Building loyalty,

Fair Value.
 VALUE…..????

• Ray Kordupleski in the 1980s and discussed in his book,

Mastering Customer Value Management.
• CCD
• ..\MM_VDO\MKT_VIDEOS\Chennai express climax_2018 07 21_12 05 34_1_224.mp4
 VALUE PRICE??

• A market offering has 2 elemental characteristics:

✓its value and
✓its price.
• Thus raising or lowering the price of a market offering does not change the value that
such an offering provides to a customer…….
• Rather, it changes the customer’s incentive to purchase that market offering.
 • Delivering value to customers is important to
………managers, leaders, and entrepreneurs
alike.
• To be willing to pay, a customer must derive
CUSTOMER value from a market offer.
VALUE • However, what is customer value?
• How does a supplier deliver customer value?
 What is customer value?

• There are various interpretations of what is meant by customer value.

• It may mean
✓low price,
✓receiving what is desired,
✓receiving quality for what is paid,
✓or receiving something in return for what is given
(Zeithaml, 1988).
 • Woodruff’s (1997) definition of customer value is
widely cited and encompasses most interpretations
of customer value.
• Woodruff defines customer value as:
• “a customer perceived preference for
and evaluation of those products
CV Defined attributes, attribute performances, and
consequences arising from use that
facilitate (or block) achieving the
customer’s goals and purposes in use
situations”.
 ASPECTS OF VALUE
• The definition suggests that there are two aspects to customer value:
Desired value and Perceived value.
• Desired value refers to what customers desire in a product or service.
• Perceived value is the benefit that a customer believes he or she received
from a product after it was purchased.
• Customer value can be examined at different levels.
• At a low level, customer value can be viewed as the attributes of a product
that a customer perceives to receive value from. At a higher level,
customer value can be viewed as the emotional payoff and achievement of
a goal or desire.
• ..\..\..\Desktop\MKT_VIDEOS\Fair and Lovely Ad-Dance Audition._2018 07 21_12 46 17_1_142.mp4
 CUSTOMER VALUE ( CV)
• Total customer value or CV is the perceived monetary value of the bundle of
✓economic,
✓functional, and
✓psychological benefits customers expect
from a given market offering
• because of the……. products, services, personnel, and image involved.
• The marketer should consider the entire life cycle of the offering in
question, from how the customer acquires and uses it to how the customer
disposes of it when it is no longer needed.
 CPV & its components
• ..\MM_VDO\MKT_VIDEOS\Creating Customer Value_2018 07 19_01 29
14_1_869.mp4

•CPV = TCB-TCC
• TCB = (PDB+SB+PNB+IB)
PSPI
• TCC = MNC+TC+EC+PC
METP
✓All Costs borne for acquisition, usage,
maintenance, ownership & disposal
 CUSTOMER VALUE PROPOSITION
• To develop compelling customer value
propositions, a supplier needs to keep in
mind the following:
✓Understanding what customers value is
the first step in delivering customer value.
✓Value is perceived at various levels;
therefore, value needs to be delivered at
various levels.
✓There are two stages at which customers
assess value: before and after they
purchase a product or service.
✓https://www.toolshero.com/marke
ting/customer-value-proposition-
cvp/
 Value & competition
• Comparison of value through an equation:

• Values and Prices are the value and price of the supplier’s market
offering, and Valuea and Pricea are the value and price of the next best
alternative.
• The difference between value and price equals the customer’s
incentive to purchase.
• Simply put, the equation conveys that the customer’s incentive to
purchase a marketer’s offering must exceed its incentive to pursue the
next best alternative.
• ..\MM_VDO\MKT_VIDEOS\How to Sell Value vs. Price_2018 07 19_01 43 28_1_516.mp4
 Customer Value Proposition & Holistic Marketing
• PIRI
• P : Financial bottom line Double
Bottom line Triple Bottom Line
(TBL)
• I : Integrated- IMC
• R: Marketing Network with key
stakeholders- Outsourcing-Focus on core
activities – Customization, 80-20
principle- CRM & PRM
• Internal - Vertical & Horizontal alignment
 Concept of Fair Value

• Perceptual
Mapping
• C:\Users\user.DESKTOP-
TF2OKRA\Downloads\Fair
value.mp4
Value Analysis
leads to

• Ascertaining of
Fair Value
• Bringing
Customer
Satisfaction
• Leading to
Loyalty
https://learn.marsdd.com/article/competitive-strategies-in-operational-
excellence-customer-intimacy-and-product-leadership/
 CLV or CLTV
• A metric that represents the total net profit a company makes from any given
customer.
• A projection to estimate a customer's monetary worth to a business after factoring
in the value of the relationship with a customer over time.
• Is the present value of the future cash flows or the value of business attributed to
the customer during his or her entire relationship with the company.
• The value a customer contributes to your business over the entire lifetime at your
company.
• Used while making important decisions about sales, marketing, product
development, and customer support.
 Basic CLV Calculation
• CLTV = (Avg. Order Value) x (No. of Repeat Sales) x (Avg Retention Time)
• Example:
✓A Health Club where -- customers pay Rs 1000 /month and
✓The average time that a person remains a customer in club --3 years.
✓Then the lifetime value of each customer is :
• Rs 1,000 per month x 12 months x 3 years = Rs 36,000.
• Means each customer is worth -- a CLV of Rs 36,000.
• When CLTV is known, how much the company can spend on paid advertising such
as Facebook ads, YouTube ads, Google Adwords etc. to acquire a new customer
can be estimated better.
• Ideally, CLV > Cost of acquiring a customer. Some also call it a break-even point.
• http://www.clv-
calculator.com/clv/definition-customer-
lifetime-value/
Customer
Profitability
 5 Step Process of
CUSTOMER VAL.
ANALYSIS
• To reveal Co.’s relative
Strengths & Weaknesses to
that of competitors’
• To help assess the
attribute/benefit Co. can
charge a higher price for.
 CUSTOMER • It is a measure of how products and services
supplied by a company meet or surpass
SATISFACTION customer expectation
• This depends on
❑ the offer’s performance in relationship to
the buyer’s expectations and
❑ whether the buyer interprets any deviations
between the two.
• Companies should try to satisfy their
customers. Satisfied customers usually
return and buy more, they tell other people
about their experiences, and they may well
pay a premium for the privilege of doing
business with a supplier they trust.
 Measuring Customer Satisfaction
• Customer satisfaction - the degree to which purchasers of goods and
services are happy with not only the goods and services themselves, but the
experience of ordering them, the delivery process, and every other part of
the process.
• Different organizations use different approaches to measure customer
satisfaction, but they all tend to fall into two main approaches:
• Customer Satisfaction Indices (CSI )
• Customer satisfaction scores ( CSS)
• CSI &CSS measures assume that the more satisfied a customer is the more
likely they are to stay as a customer.
 Customer Satisfaction Index
• A customer satisfaction index combines the customer survey scores from
different business attributes to create a single customer satisfaction index
that indicates the overall customer satisfaction.
• People are used to the concept of rating things with numerical scores and
these can work well in surveys.
• Once the customer has been given the scale, they can readily give a number
to express their level of satisfaction.
• Typically, scales of 5, 7 or 10 are used , lowest figure-extreme dissatisfaction
& highest- extreme satisfaction.
• For example adding the customer survey scores for responsiveness,
cleanliness, product quality and price then dividing by four. This give an
index with the same range as each of the attribute scores.
 Customer Satisfaction Index

• The main issue with this approach is not able to determine how important
each attribute is in driving customer satisfaction.
• For example, in reality, your customer satisfaction may be 60% based on
price and 10% on each of the other attributes. If that is the case the index
created above would give an inaccurate result.
 Why CSI ?

• Customer Satisfaction Index (CSI) has determined that in most cases,

quality is more important than price.
• It has been found that while quality of a product or service is the top priority,
price doesn’t even enter into the top ten priorities overall, which, in addition
to quality, include treatment as a valued customer, speed, friendliness, how
problems and complaints are handled, how queries are handled,
competence of staff, how easy it is to do business with the company,
whether or not the customer is kept informed, and how helpful the staff is.
 Customer Satisfaction Score
• The other approach is to use a single question in the survey to rate customer
satisfaction. There has been lots of research over the year to determine which is
the best question to ask.
• This Score attempts to directly measure a customer’s satisfaction.
• The following two questions have become quite popular as customer satisfaction
score questions:
✓Please think about all of your experiences with Company X. Please rate your overall
satisfaction in your dealings with them, where 10 is very satisfied and 1 is very
dissatisfied?
✓How likely is it that you would recommend Company X to a friend or colleague,
where 10 is very likely and 1 is very unlikely?