5-1 MARKETING MANAGEMENT Creating Customer Value, Satisfaction and Loyalty

5-2 Chapter Questions What are customer value, satisfaction, and loyalty, and how can companies deliver them? What is the lifetime value of customers? How can companies both attract and retain customers?

5-3 The Value Proposition The cluster of benefits the company promises to deliver

5-4 A Customer-Oriented Model?

5-5 Measuring Satisfaction Periodic Surveys Customer Loss Rate Mystery Shoppers Monitor competitive performance

5-6 Loyalty A commitment to re-buy or re-patronize a product or service in the future.

5-7 Maximizing Customer Lifetime Value Customer Profitability Customer Equity Lifetime Value

5-8 Estimating Lifetime Value Annual customer revenue: $500 Average number of loyal years: 20 Company profit margin: 10 Customer lifetime value: $1000

5-9 Framework for CRM Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge Customize for each customer

5-10 CRM Strategies Reduce the rate of defection Increase longevity Enhance “share of wallet” Terminate low-profit customers Focus more effort on high-profit customers

5-11 Customer Retention Acquisition of customers can cost 5 times more than retaining current customers. The average customer loses 10% of its customers each year. A 5% reduction to the customer defection rate can increase profits by 25% to 85%. The customer profit rate increases over the life of a retained customer.

5-12 Customer-Development Process Prospects Suspects Disqualified First-time customers Repeat customers ClientsMembers Partners Ex-customers

5-13 Reducing Customer Defection Define and measure retention rate. Distinguish causes of customer attrition. Estimate profit loss associated with loss of customers. Assess cost to reduce defection rate. Gather customer feedback.

5-14 Forming Strong Customer Bonds Add financial benefits Add social benefits Add structural ties