5

Creating Customer Value,

Satisfaction,
and Loyalty
 Questions We Would Answer
• How can companies deliver customer
value, satisfaction, and loyalty?
• What is the lifetime value of a customer,
and why is it important to marketers?
• How can companies cultivate strong
customer relationships?
• What is the role of database marketing
in customer relationship management?
 What is Customer Perceived Value?
Customer perceived value is the difference between the
prospective customer’s evaluation of all the benefits and all
the costs of an offering and the perceived alternatives.

 Total customer value is the perceived monetary value of

the bundle of economic, functional and psychological
benefits customers expect from a given market offering.

 Total customer cost is the bundle of costs customers

expect to incur in evaluating, obtaining, using and
disposing of a given market offering, including monetary,
time, energy and psychic costs.
 Determinants of
Customer Perceived Value

Total customer benefit Total customer cost

Product benefit Monetary cost

Services benefit Time cost

Personal benefit Energy cost

Image benefit Psychological cost

 Steps in a Customer Value Analysis

• Identify major attributes and benefits that

customers value
• Assess the qualitative importance of
different attributes and benefits
• Assess the company’s and competitor’s
performances on the different customer
values against rated importance
• Examine ratings of specific segments
• Monitor customer values over time
 Choices and Implications
• The buyer may be under orders to buy at the lowest
price
• The buyer will retire before the company realises
that the product is more expensive to run
• The buyer enjoys a long-term friendship with one of
the sales people
• Buyers operate under various constraints and
occasionally make choices that give more weight to
their personal benefit than to the company’s benefit.
 Delivering high customer value

• Loyalty (as defined by Oliver) = a deeply held commitment to re-buy or re-

patronise a preferred product or service in the future despite situational
influences and marketing efforts having the potential to cause switching
behaviour.
• The key to generating high customer loyalty is to deliver high customer
value.
• The value proposition consists of the whole cluster of benefits the
company promises to deliver; it is more than the core positioning of the
offering.
• The value-delivery system includes all the experiences the customer will
have on the way to obtaining and using the offering.
 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.
 Building Loyalty
1. Interacting with customers
• Capture stated and unstated needs
• Be a customer advocate

2. Developing loyalty programs

• Frequency Programs
• Club marketing programs
3. Personalizing marketing
• Personalize the product or service to the
customer
• Right technology

4. Creating institutional ties

• Help customers manage orders
• Win-Backs-Learn who you are losing and why
you are losing them.
 Top Brands in Customer Loyalty
• Avis • Land’s End
• Google • Coors
• L.L. Bean • Hyatt
• Samsung (mobile • Marriott
phones) • Verizon
• Yahoo! • KeySpan Energy
• Canon (office copiers) • Miller Genuine Draft
• Amazon