 Types of Customer Value  Customer Perceived Value  Satisfaction  Loyalty  Customer Satisfaction and Marketing Performance

 The difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives  Determinants of Customer Perceived Value  Hierarchies of Values (Means-end Chains)

Total customer valueTotal customer cost Economic benefitMonetary cost Functional benefitTime cost Psychological benefitEffort cost Psychological cost Customer Perceived Value

Means-end chain for Belgian meat consumption

Satisfaction and Loyalty Expectations Performance SatisfactionLoyalty (Repurchase) =><=><

 A deeply held commitment to re-buy or repatronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior

Satisfaction and Loyalty (Commitment) Satisfaction Commitment Repurchase

Satisfaction and Loyalty (Commitment) Satisfaction Commitment? ? Repurchase

Satisfaction and Loyalty (Commitment) Satisfaction CommitmentQuality of Alternatives ? Repurchase

Satisfaction and Loyalty (Commitment) Satisfaction CommitmentQuality of Alternatives Investments in the Relationship Repurchase

 A Key Marketing Performance Metric

Very Dissatisfied DissatisfiedSomewhat Dissatisfied Somewhat Satisfied SatisfiedVery Satisfied Satisfaction measured on a six-point scale like the one presented below. Based on this scale we can create a Customer Satisfaction Index ranging from 0 to 100. The Customer Satisfaction Index gives you an idea on how satisfied the customers are on average. Lets assume 10 respondents: 1:0, 2:5, 3:2, 4:4, 5:4, 6:5, 7:5, 8:4, 9:4, 10:3= SUM: 31, Average: 3.1, what about the index? All very satisfied: SUM:50; average:5, Index set to 100 All very dissatisfied: SUM:0; average:0, Index set to 0 All satisfied: SUM:40, average:4, Index set to 80 (SUM/(Max scale point x N))x100=Index score, in our example: 31/50 x 100 = 62

Customer Satisfaction Customer Percent Customer Sales Percent Margin Gross Profit Retention Cost Customer Profit Very Satisfied 25%$1,20060%$720$100$620 Satisfied35%$80050%$400$100$300 Somewhat Satisfied 20%$30040%$120$100$20 Somewhat Dissatisfied 15%$8040%$32$100-$68 Dissatisfied3%$6040%$24$100-$76 Very Dissatisfied 2%$5040%$20$100-$80 Weighted Average $ %$350$100$350

Customer Base 200,000 Satisfied 70% (140,000) Dissatisfied 30% (60,000) New Customers Needed 24.86% Don’t Complain 90% (54,000) Do Complain 10%(6,000) Not Retained 78% Retained 22% Not Retained 10% Retained 90% Not retained 5% Retained 95% 133,000 -7,000 5, , ,120 49,720

Customer PerformanceRetained Customers 75% Lost Customers New Customers Overall Performance # of Customers150,000-50,00050,000200,000 Revenue per C.$800$200$400 Sales Revenue (millions)$120$10$20$150 Percent Margin50%25% 43.8% Margin per C.$400$50$100 Gross Profit (millions)$60.0$2.5$5.0$67.5 Marketing Expense per C.$60 $300 Marketing Expenses (mill.)$9.00$3.00$15.00$27.0 Net Marketing Contribution (millions) $51.00-$0.50-$10.00$40.5 Operating Expenses (millions) $33.0 Net Profit Before Taxes (millions) $7.5 5%

Customer PerformanceRetained Customers 80% Lost Customers New Customers Overall Performance # of Customers160,000-40,00040,000200,000 Revenue per C.$800$200$400 Sales Revenue (millions)$128$8$16$152 Percent Margin50%25% 43.8% Margin per C.$400$50$100 Gross Profit (millions)$64.0$2.0$4.0$70.0 Marketing Expense per C.$65 $300 Marketing Expenses (mill.)$10.40$2.60$12.00$25.0 Net Marketing Contribution (millions) $53.60-$0.60-$8.00$45.0 Operating Expenses (millions) $33.0 Net Profit Before Taxes (millions) $ %

 “The gulf between satisfied and completely satisfied customers can swallow a business” (Jones and Sasser, 1994.)

Definitely Will Not Repurchase Will Not Repurchase Probably Will Not Repurchase Probably Will Repurchase Plan to Repurchase Definitely Will Repurchase Intention to RepurchasePercentProbability Definitely Will Repurchase25%1.00 Plan to Repurchase35%.80 Probably Will Repurchase20%.60 Probably Will Not Repurchase15%.40 Will Not Repurchase3%.20 Definitely Will Not Repurchase2%0.00 Total:100%.72 Customer Retention72%

Customer Life (purchase periods) Customer Life (N) (given rate of customer retention) CR = Customer Retention Rate Retention rate

Period Cash Flow Present Value of $1 Present Value of Cash Flow 0-$ $51,00 1$30.909$ $42.826$ $44.751$ $49.683$ $55.621$34.20 Net Present Value of Cash Flow$ PV=1/(1+DR) N

 Kotler, P. & K.L. Keller: Ch. 2 & Ch. 4  Holbrook, M.B. (1999): Introduction to Consumer Value, in Consumer Value: A Framework for Analysis and Research, London: Routledge, 1-28  Best, Roger J. (2009): Market-Based Management: Strategies for Growing Customer Value and Profitability, 5th ed., Pearson Prentice Hall, New Jersey (ISBN-13: )