Creating

Customer Value,
Satisfaction and
loyalty

Chapter 5
 Outline
• Customer value, satisfaction and loyalty
• Maximizing Lifetime value of customers
• Cultivating customer relationship
• Customer database and database marketing
Building
Customer Value,
Satisfaction, and
❑Customer Perceived Value
Loyalty ❑Total Customer Satisfaction
❑Monitoring Satisfaction
❑Quality
 Customer Value
• I am highly satisfied with my Toyota Corolla
car. I would rate 10 out of 10 satisfaction. But
my next car will be Honda Civic.
 Customer
Perceived Value

Total Customer Total Customer

Benefit Cost

Product Benefit Monetary Cost

Services Benefit Time Cost

Personal
Energy Cost
Benefit

Psychological
Image Benefit
Cost
Benefit components Sacrifice Components
Economic Benefit Price Sacrifices
Emotional Benefit Time sacrifices
Social Benefit Effort Sacrifices
Relationship Benefit Risk &
Inconvenience
 Steps in Customer Value Analysis
1. Identify major attributes & benefits that customer
value

2. Assess quantitative importance of different

attributes and benefits

3. Assess company’s and competitors performance

on different customer value against their related
importance

4. How customers specific segment rate company’s

performance against specific major competitor on an
individual attribute or benefit basis

5. Monitor customer values over time

1. Identify major attributes & benefits
that customer value

Benefits and attributes

Look
Performance
Space/Comfort
Fuel Economy
Resale
2. Assess quantitative importance of
different attributes and benefits
Benefits and attributes Relative Importance
Look 0.2
Performance 0.4
Space/Comfort 0.25
Fuel Economy 0.1
Resale 0.05
 3. Assess company’s and competitors
performance on different customer
value against their related importance
Benefits and Relative Honda City Toyota Corolla
attributes Importance
Look 0.2 4.5 4
Performance 0.4 4 3.75
Space/Comfort 0.25 4 4
Fuel Economy 0.1 3.5 4
Resale 0.05 3 4.5
 Step 4
Benefits Relative Honda City Toyota Honda City Toyota
and Importance Corolla (Weighted Corolla
attributes Score) (Weighted
Score)
Look 0.2 4.5 4 0.9 0.8
Performan 0.4 4 3.75 1.6 1.5
ce
Space/Com 0.25 4 4 1 1
fort
Fuel 0.1 3.5 4 0.35 0.4
Economy
Resale 0.05 3 4.5 0.15 0.225
Overall 4 3.925
Rating
Customer Choices and Implications

Increase Benefits Reduce Customer Cost

• Augmenting economic or
functional benefits
• Providing better services
• Psychological benefits
• Reducing price
• Cost of maintenance
• Simplify ordering and
delivery process
• Absorbing some buyer risk
 Customer Satisfaction
• A company last year cancelled more than
1000 customer accounts due to excessive
complaints!
• Another company announces plan to lay off
5000 workers and the fact they have lost more
than 300,000 customer in last quarters
 Total Customer Satisfaction
Customer
Customer
Expectation
Perception
Dissatisfied Customer
Expectation

Customer Customer Satisfied

Expectation Perception

Customer
Customer
Customer Perception Delighted Perception
Expectation
 Monitoring Satisfaction
• Periodic surveys
• Customer loss rate
• Mystery shoppers
• Monitor competitive
performance
 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.
What is Quality?
Maximizing
Customer
Lifetime Value
(CLV) ❑Customer Profitability
❑Measuring Customer Life time
value
 Customer Profitability
A profitable customer is a person, household, or
company that over time yields revenue stream
that exceeds by an acceptable amount that
company’s cost stream for attracting , selling,
and servicing that customer.
Customer Profitability: estimates all revenues
coming from customer less all cost.
Measuring Customer Lifetime Value
Retention Dynamics
 Building Loyalty
1. Interact closely with customers.
• Deere & Company, which makes John Deere
tractors and has a superb record of customer
loyalty—nearly 98 percent annual retention in
some product areas—has used retired
employees to interview defectors and
customers.
 Building Loyalty
Develop Loyalty Program
• Frequency programs
• Club membership programs
Apple encourages owners of its computers to form local
Apple user groups. There are hundreds of groups,
ranging in size from fewer than 30 members to more
than 1,000. The groups provide Apple owners with
opportunities to learn more about their computers,
share ideas, and get product discounts. They sponsor
special activities and events and perform community
service. A visit to Apple’s Web site will help a customer
find a nearby user group
Cultivating
Customer
❑Customer Relationship
Relationships Management
❑Attracting & Retaining
Customers
❑Building Loyalty
 Customer Relationship Management
• Process of carefully managing detailed
information about customers and all customer
“touch points” to maximize customer loyalty
• Helps companies to provide real time
customer service, customize market offerings,
programs and messages.
 Framework for CRM
1. Identify your prospect and customers
2. Differentiate your customers by needs and
value to company
3. Interact to improve knowledge
4. Customize product, service, messages to
each customer
 CRM Strategies
Strategies Example Restaurant
strategies
Reducing rate of Training Employee
defection
Increase longevity of Consumer Engagement
customer relationship.
Increasing share of Increase new offerings and
wallet. opportunities , cross-selling
and up-selling
Making low profit Offering bulk with
customer profitable discount, reduced features,
Focusing Birthday greetings, small
disproportionate effort gifts, invitation to events
on high-profit etc.
customers
Forming Strong Customer Bond

Customer Interaction

Add financial benefits

Personalizing Marketing

Add Structural ties

Customer
Databases &
Database
Marketing ❑Customer Databases
❑Database warehouses and data
mining
 Customer Databases
• Customer database
• Database marketing
• Customer mailing list
• Business database
Mailing List

Business Database
Customer Database
• Set of names • Registration • Business
• Addresses information customers past
• Telephone • Telephone purchases
numbers queries • Volumes
• Past purchases • Prices
• Demographics • Profits
• Psychographics • Buyer team
• media graphics members
• Status of
current contract
• Buyer practices
and policies
 Using Database
• To identify prospects
• To target offers
• To deepen loyalty
• To reactivate customers
• To avoid mistakes
 Don’t Build a Database When
• The product is a once-in-a-lifetime purchase
• Customers do not show loyalty
• The unit sale is very small
• The cost of gathering information is too high
End of Chapter