Chapter

4
Creating Long-
Term Loyalty
Relationships

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Learning Objectives
1. How can companies deliver customer value,
satisfaction, and loyalty?
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 and communities?

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Building Customer Value, Satisfaction,
and Loyalty
• Customer-perceived value (CPV)

– The difference between the prospective

customer’s evaluation of all the benefits and
costs of an offering and the perceived
alternatives

– Total customer benefit vs. total customer cost

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 Figure 4.1
Determinants of CPV

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Building Customer Value, Satisfaction,
and Loyalty
• Customer-perceived
value (CPV)

–Loyalty

–Value proposition

–Value delivery system

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Building Customer Value, Satisfaction,
and Loyalty
• Total customer satisfaction
– A person’s feelings of pleasure or
disappointment that result from comparing a
product or service’s perceived performance
(or outcome) to expectations

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Building Customer Value, Satisfaction,
and Loyalty
• Monitoring satisfaction
– Many companies are systematically
measuring how well they treat customers,
identifying the factors shaping satisfaction,
and changing operations and marketing as a
result

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Building Customer Value, Satisfaction,
and Loyalty
• Product and service quality
– Quality is the totality of features and
characteristics of a product or service that
bear on its ability to satisfy stated or implied
needs
– Conformance quality vs. performance quality

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 Maximizing
Customer Lifetime Value
• Customer profitabillity analysis
– Activity-based costing (ABC)

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 Figure 4.2
Customer-Product Profitability Analysis

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 Maximizing
Customer Lifetime Value
• Customer lifetime value (CLV)
– The net present value of the stream of future
profits expected over the customer’s lifetime
purchases

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 Maximizing
Customer Lifetime Value

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 Cultivating Customer Relationships
• Customer relationship management (CRM)
– The process of carefully managing detailed
information about individual customers and all
customer “touch points” to maximize loyalty
– Touch points

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 CRM

• Personalizing marketing

• Permission marketing

• Customer empowerment

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 Attracting and Retaining Customers

• Reducing customer churn/defection

 Define and measure retention rate

 Distinguish customer attrition causes
 Compare lost CLV to reducing defection rate

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 Attracting and Retaining Customers
• The marketing funnel

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 Attracting and Retaining Customers
• Managing the customer base
Reduce
customer
defection
Focus on Increase
high-profit customer
customers longevity

Terminate Share of wallet

low-profit &
customers cross/upselling

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 Building Loyalty
Interact closely with customers

Develop loyalty programs

Create institutional ties

Create value with brand communities

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 Brand Communities
• Sense of connection to
brand
• Shared rituals, stories,
and traditions that
convey meaning
• Shared responsibility to
the community members

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 Win-Backs
• Some customers inevitably become inactive or
drop
– Challenge is to reactivate them through win-
back strategies
– Often easier to reattract ex-customers than to
find new ones

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Copyright © 2016 Pearson Education, Inc. 4-21