©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 0 of 18 Chapter 3 Building Customer Satisfaction, Value, and Retention PowerPoint by Karen E. James Louisiana State University - Shreveport

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 1 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, 2 nd Edition Slide 2 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, 2 nd Edition Slide 3 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, 2 nd Edition Slide 4 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, 2 nd Edition Slide 5 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, 2 nd Edition Slide 6 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, 2 nd Edition Slide 7 of 18 High Performance Businesses Keys to Success  Stakeholders  Processes  Resources  Organization  Identify several stakeholder groups for your University  How might the needs of these groups conflict with each other?

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 8 of 18 High Performance Businesses Keys to Success  Stakeholders  Processes  Resources  Organization  New product development  Customer attraction and retention  Order fulfillment  Reengineering work flows  Building cross functional teams

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 9 of 18 High Performance Businesses Keys to Success  Stakeholders  Processes  Resources  Organization  Resources include labor, materials, machines, energy, and information  Outsourcing vs. ownership: Own and nurture core competencies

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 10 of 18 High Performance Businesses Keys to Success  Stakeholders  Processes  Resources  Organization  Organization refers to the organization’s policies, structures, and corporate culture  Corporate culture: shared experiences, stories, beliefs, and norms within an organization

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 11 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, 2 nd Edition Slide 12 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, 2 nd Edition Slide 13 of 18 Drivers of Customer Equity  Brand Equity  Relationship Equity  Value Equity

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 14 of 18 Strong Customer Bonds Keys to Success  Adding Financial Benefits  Adding Social Benefits  Adding Structural Ties  Frequency programs  Club memberships

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 15 of 18 Strong Customer Bonds Keys to Success  Adding Financial Benefits  Adding Social Benefits  Adding Structural Ties  Personalize customer relationships

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 16 of 18 Strong Customer Bonds Keys to Success  Adding Financial Benefits  Adding Social Benefits  Adding Structural Tie  Create long-term contracts  Charge less for ongoing purchases  Link product to long-term service

©2003 Prentice Hall, Inc.To accompany A Framework for Marketing Management, 2 nd Edition Slide 17 of – 80 – 30 Rule Half of your profit is lost serving the bottom 30% of your customer base 20% of your customers Generate 80% of your profit