Creating Long-term Loyalty Relationships

Discussion Questions
1. What are customer value, satisfaction, and loyalty, and
how can companies deliver them?
2. What is the lifetime value of customers, and how can
marketers maximize it?
3. How can companies attract and retain the right customers
and cultivate strong customer relationships?
4. What are the pros and cons of database marketing?

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Customer Value, Satisfaction, and Loyalty
Holistic Marketing
• Inform
• Engage
• Energize

Martha Rogers say:

“The only value your company will ever create is the value that comes
from customers— the ones you have now and the ones you will have in the
future. Businesses succeed by getting, keeping, and growing customers.
Customers are the only reason you build factories, hire employees,
schedule meetings, lay fiber-optic lines, or engage in any business activity.
Without customers, you don’t have a business”

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 Traditional Organization vs.
Customer-Oriented Organization

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 1. Customer Perceived Value

Customer-
Economic perceived Value

Evaluating

Functional Obtaining

Using

Psychological Disposing
Total Customer Total Customer
Benefit Cost

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 Customer-
perceived value

Total customer Total customer

benefit cost

Determinants Product benefit

Monetary
cost
of Customer
Services Time
Perceived Value benefit cost

Personal Energy
benefit cost

Image Psychological
benefit cost

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 Choice Processes and Implications

Friends with Lowest purchase

salesperson price wins.

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 e d
if n
e
D Customer Loyalty

“A deeply held commitment to rebuy or

repatronize a preferred product or
service in the future despite situational
influences and marketing efforts having
the potential to cause switching
behavior.”
-- Oliver
Value Proposition - consists of the whole cluster of benefits the
company promises to deliver; it is more than the core positioning of the offering.

Core positioning:
Ex. Volvo
• Safety Other benefits:
• Good performance
• Design
• Environmentally friendly

The value delivery system

includes all the experiences
the customer will have on
the way to obtaining and
using the offering.
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 e d
if n
e
D Satisfaction

A person’s feelings of pleasure or

disappointment that result from
comparing a product’s perceived
performance to (or outcome) to
expectations.
 Customer Satisfaction

Expectations

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 Customer Expectations

Previous purchases
Friends advice
Marketers’ / competitors
Expectations

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 Monitoring Satisfaction
B. Influence of
Customer Satisfaction

A.
Measurement
Techniques

C.
Customer
Complaints
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 A. Measurement Techniques
Customer Loss Rate

Surveys

Mystery Shopper
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B. Influence of Customer Satisfaction

Customer satisfaction is as a
measurement that determines
how happy customers are with a
company's products, services,
Customer satisfaction and capabilities

 Communication is vital to marketing

because it brings everyone on the same
page

 Communication is the only key through

which the marketers can spread the word
about their products to the customers.
Speed of communication
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 Modes of communication
1. Advertising

2. Public Relations
and Publicity

3. Direct
Marketing

4. Personal Selling

5. Promotion

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 C. Customer Complaints
54% - 70%
5% Buy again if resolved Tell 5
Complain people
95%
If resolved quickly
25%
Dissatisfied
95% Tell 11
Stop buying people

Gaps between what business promises in

terms of product or service and what
customers get
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 Common Customer Complaints

 Long Wait on Hold. ...

 Unavailable or Out of Stock Product. ...
 Repeating the Customer's Problem. ...
 Uninterested Service Rep. ...
 Poor Product or Service. ...
 No First Call Resolution. ...
 Lack of Follow Up. ...
 New Product or Feature
Request.

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 Product and Service Quality
Performance Conformance

Product Quality. - degree to which

the product or service meets the Quality
customer's expectations

Service Quality-refers to a customer's

comparison of service expectations as it
relates to a company's performance

Satisfactio Profitabili
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Slide 21 of 34
Maximizing Customer Lifetime Value
 an input to determine
how much is reasonable
to spend to acquire a
new customer—
customer acquisition
cost
20% of 80% of
Customers Profits

“Customers are the lifeblood of a

business
Customers
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Ways in maximizing customer lifetime value
1. Up-Sell and Cross-Sell
2. Open up Multiple Communication Channels
3. Be Transparent with Testimonials, Reviews, and
Feedback
4. Segment Your Customer Base
5. Cultivate Brand Loyalty
6. Give Customers Something Nice…
Just for Being Customers
7. Focus on Quality above All Else
Customers
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 Customer Profitability
Customer Profitability Analysis
 identify the real costs associated with
serving each customer—the costs of
products and services based on the
resources they consume.

Profitable
Customer Lifetime Value
 subtract from its expected revenues the
expected costs of attracting, selling, and
servicing the account of that customer, applying
the appropriate discount rate
Unprofitable
 

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 e d
if n
e
D A Profitable Customer

A person, household, or company that

over time yields a revenue stream
exceeding by an acceptable amount the
company’s cost stream for attracting,
selling, and serving that customer.
 Customer-Product
Profitability Analysis

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 Cultivating Customer Relationships

Customer Information
• Differentiate
• Customize
• Personalize
• Share

Web sites enable customers to share

information about their experiences
with various products and services

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Customer Relationship Management (CRM)

Personalizing Marketing

Customer Empowerment

Customer Reviews & Recommendations

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Personalizing Marketing - making sure the brand and its marketing
are as relevant as possible to as many customers as possible—a challenge, given
that no two customers are identical.

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 One-to-One Marketing
Identify prospects Differentiate
and customers customers

Interact with
each customer Customize

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Customer Empowerment - is when you give
customers the information and the tools that they
need to make a decision.

Brand Evangelists
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Customer Reviews/Recommendations
Create Buzz

Negative reviews

Customer ratings
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Customer Retention - increases your customers' lifetime
value and boosts your revenue

Acquiring new customers costs

5x more The average company loses

than retaining current customers 10%

Of its customers yearly

Reducing customer defections by 5% can

increase profits from

25% to 85%
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 Attracting and Retaining Customers
Manage
customer base

Reduce Defections
1. Define and measure
2. Determine causes
3. Compare CLV to
costs

Retention Dynamics
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 The Marketing Funnel

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 Building Loyalty
Interact with customers - Listening to customers is crucial to
customer relationship management.

Create institutional ties - The company

may supply customers with special equipment
or computer links that help them manage
orders, payroll, and inventory.

Develop loyalty programs - designed to reward customers who

buy frequently and in substantial amounts
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall Slide 36 of 34
Win-Backs
 Regardless of how hard companies may try, some customers inevitably
become inactive or drop out.
 The challenge is to reactivate them through win-back strategies. It’s
often easier to reattract ex-customers (because the company knows
their names and histories) than to find new ones.
 Exit interviews and lost-customer surveys can uncover sources of
dissatisfaction and help win back only those with strong profit potential.

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 Databases & Database Marketing
Customer databases
• Name, address, telephone #
• Purchase history
• Demographics
• Psychographics
• Mediagraphics
Data mining

Data Warehouses

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 Thank You for listening

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