Strong Customer Bonds

Keys to Success  Create long-term

contracts

 Adding Financial  Charge less for

Benefits ongoing
 Adding Social purchases
Benefits  Link product to
 Adding Structural long-term service
Tie
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 1 of 18
 Strong Customer Bonds

Keys to Success  Personalize

customer
relationships
 Adding Financial
Benefits
 Adding Social
Benefits
 Adding Structural
Ties
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 2 of 18
 Strong Customer Bonds

Keys to Success  Frequency

programs
 Adding Financial  Club
Benefits memberships
 Adding Social
Benefits
 Adding Structural
Ties
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 3 of 18
High Performance Businesses

Keys to Success  Organization refers

to the organization’s
policies, structures,
 Stakeholders and corporate culture
 Processes  Corporate culture:
shared experiences,
 Resources stories, beliefs, and
 Organization norms within an
organization
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 4 of 18
High Performance Businesses

Keys to Success  Identify several

stakeholder
groups for your
 Stakeholders
University
 Processes
 How might the
 Resources needs of these
 Organization groups conflict
with each other?
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 5 of 18
 Objectives

 Understand how companies

deliver customer value and
satisfaction.
 Identify the factors that make a
high performance business.
 Understand how companies
attract and retain customers.
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 6 of 18
 Objectives

 Realize how companies can

improve both customer and
company profitability.
 Understand how companies can
deliver total quality.

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 7 of 18
 Customer Value

 Customers seek to maximize value by

– estimating which offer (product/firm)
delivers the most value (CPV)
– forming an expectation of value and acting
upon it (purchase)
– evaluating their usage experience against
the expectations
 Satisfaction results when expectations
are equaled or surpassed
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 8 of 18
 Customer Perceived Value

 Perception of delivered value is a

function of:
– Total customer costs
– Total customer value
 Firms at a disadvantage must:
– Reduce perceptions of costs or
enhance perceptions of value
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 9 of 18
 Customer Satisfaction

 Satisfaction is defined as . . .
“a person’s feelings of pleasure or
disappointment resulting from
comparing a product’s perceived
performance (or outcome) in
relation to his or her expectations.”

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 10 of 18
 Customer Satisfaction

 To maximize satisfaction . . .
– Don’t exaggerate the product /
service’s capabilities in advertising
or other communications
 Dissatisfaction
will result
 FTC may become involved

– Don’t set expectations too low

 Market size will be limited
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 11 of 18
High Performance Businesses

Keys to Success  New product

development
 Customer attraction
 Stakeholders and retention
 Processes  Order fulfillment
 Reengineering work
 Resources flows
 Organization  Building cross
functional teams
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 12 of 18
High Performance Businesses

Keys to Success  Resources include

labor, materials,
machines, energy,
 Stakeholders
and information
 Processes
 Outsourcing vs.
 Resources ownership: Own
 Organization and nurture core
competencies
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 13 of 18
 Core Business Practices

 Market Sensing
 Customer Acquisition
 Customer Relationship
Management
 Fulfillment Management
 New Offering Realization
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 14 of 18
 Customer Retention

 Reducing customer churn (defection)

is highly desirable
– Define and measure retention rate
– Identify causes of attrition
– Estimate profit lost from customer
defection (customer lifetime value)
– Estimate cost to reduce defection; take
appropriate action
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 15 of 18
 Drivers of Customer Equity

 Brand Equity
 Relationship Equity
 Value Equity

©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 16 of 18
 20 – 80 – 30 Rule

20 20% of your customers

80 Generate 80% of your profit
30 Half of your profit is lost
serving the bottom 30%
of your customer base
©2003 Prentice Hall, Inc. To accompany A Framework for Marketing Management, 2nd Edition Slide 17 of 18