5 Creating Customer Value, Satisfaction, and Loyalty MARKETING STRATEGY 5 Creating Customer Value, Satisfaction, and Loyalty

Organizational Chart Successful marketing companies follow the chart where customers are at the top; next in importance are front line people who meet, serve, and satisfy customers; under them are middle managers, whose job is to support the front-line people; and at the base is top management, whose job is to hire and support middle managers. Even managers at every level must be personally involved in knowing, meeting and serving customers

Customer perceived Value Customer perceived Value: is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering. Total customer Value: perceived momentary value of the bundle of economic, functional and psychological benefits customers expect from a given offering.

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

The Value Proposition The whole cluster of benefits the company promises to deliver (BMW – ‘The ultimate driving machine’, Red Bull – ‘Giving winds’)

Total Customer Satisfaction Satisfaction: is a person’s feelings (attitudes) of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his / her expectations.

Measuring Satisfaction One key to customer retention is customer satisfaction; a satisfied customer stays loyal, longer, buys more, talks favorably, and is less price sensitive. Periodic surveys; respondents are asked questions Monitor Customer loss rate; contact customers who have stopped buying Monitor competitive performance

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.

Quality Conformance to requirements Performance level (e.g. Lexus provides higher performance quality than a Hyundai; better ride, faster, lasts longer) However, both may offer the same conformance quality if all units deliver the promised quality.

Total Quality Management TQM is an organization-wide approach to continuously improving the quality of all the organization’s processes, products, and services.

Maximizing Customer Lifetime Value Customer profitability: is a person, household, or company that over time yields sufficient revenue. Customer equity: the consumer’s objective assessment of the utility of an offering based on perceptions. The more loyal the customers are, the higher the customer equity. Lifetime value

Framework for CRM Stronger bonds with their customers Identify prospects and customers; maintain reach customer database. Differentiate customers by needs and value to company; spend proportionately more effort on the most valuable customers. Interact to improve knowledge about individual needs and to build stronger relationships. Customize products, services and messages for each customer

CRM Strategies (cont/d) Reduce rate of defection; selecting and training employees to be knowledgeable and friendly increases the likelihood that all questions from customers will be answered satisfactorily Increase long life; being involved with the company Enhance share of wallet; sells more of a product and other supplement products Terminate low-profit customers or make them more profitable Focus more effort on high-profit customers

Table 5.1 Mass vs. One-to-One Marketing Average customer Customer anonymity Standard product Mass production Mass distribution Mass advertising One-way message Economies of scale One-to-One Individual customer Customer profile Customized market offering Customized production Economies of scope Share of customer

Customer Retention More companies recognize the importance of satisfying and retaining customers. Acquisition of customers can cost 5 times more than retaining current customers. The customer profit rate increases over the life of a retained customer. The average company loses 10% of its customers every year.

Describing Market Dynamics; How easily & often customers can enter and leave Prospects can be converted into first-time customers then into repeat and then into clients (special and knowledgeable treatment) Permanent capture markets; Once a customer always a customer Simple retention markets; customers can be lost after each period Customer migration markets; customers can leave and come back

Building Loyalty Different levels of investment in customer relationship building Basic: the SP simply sells the product Reactive: sells and encourages the customer( by calling for questions, comments or complaints) Accountable: check if the product is meeting expectations, give suggestions for improvement Proactive: the SP calls customers from time to time with suggestions and new products Partnership: work continuously with its large customers to improve performance

Database Key Concepts Customer database: collection of comprehensive information about customers Database marketing: building, maintaining & using customer database Mailing list: set of names, addresses & telephone numbers Business database: business customers’ past purchases – volume, prices & profits Data warehouse: personnel can capture, query, and analyze the data Data mining: mktg statisticians can extract useful information about individuals, trends and segments from the mass of data

Using the Database To identify prospects through response features To target offers by setting up criteria describing the ideal target market To deepen loyalty by remembering customer preferences To reactivate customers by sending birthday and anniversary cards To avoid mistakes