CHAPTER 2 BUILDING CUSTOMER SATISFACTION, VALUE, AND RETENTION

Important Topics of This Chapter n Customer value and satisfaction. n Delivering customer value and satisfaction. n Attracting and retaining the customers. n Total Quality Marketing.

DEFINING CUSTOMER VALUE AND SATISFACTION n Total Customer Value: » monetary value Vs. perceived value » Customer delivered value = total customer value(customer benefits) minus total customer cost(using and disposing the product/service). n Customer satisfaction: » performance (expected) after purchase. Therefore, Satisfaction = f(perceived performance). » Three conditions: – below expectation, – meet the expectations – exceed expectations

CUSTOMER SATISFACTION (CONT.) n Customer Satisfaction (cont.): » Total Customer Satisfaction(TCS) » Loyalty » Respond customer needs and attract new ones » Monitor competitors performance » It is a goal and marketing tool n Problems: » identifying the reasons of dissatisfaction

DELIVERING CUSTOMER VALUE AND SATISFACTION n Value Chain System: » Benchmarking-cost and performance analysis » Coordinated efforts of each department » Core business process: n New product, inventory management, ordering and customer service n Value Delivery Network: » Partnership: n Sears » EDI: n Wal Mart, Levi’s » Quick response system: n Pulled by demand

Value Chain System Infrastructure Infrastructure Support Human Resource Management Activities Technology Development Procurement Procurement Inbound Operations Outbound Marketing Service Logistics Logistics and Sales Primary Activities Primary Activities

ATTRACTING AND RETAINING CUSTOMERS n Attracting Customers: »Customer acquisition: n Lead generation n Lead qualification n Account conversion n Cost of lost customers: » Surveys: n AT&T, MCI » Lifetime value: n Present value of the lost customer n Customer retention: » High switching barrier » High customer satisfaction n Relationship Marketing: » Looking for suspects to find prospects n Disqualified prospect: –Poor credit rating

ATTRACTING AND RETAINING CUSTOMERS »Relationship marketing (cont.) n qualified prospects into first time customer n first time customers into repeat customers n repeat customers into clients n clients into advocates n advocates into partnership. » Levels of relationship: n Basic, n Reactive n Accountable n Proactive n Partnership. »adding financial benefits: n frequency marketing program, affinity groups. »adding social benefits: n personalizing customer relations. »adding structural ties: n computer connection.

CUSTOMER PROFITABILITY: THE ULTIMATE TESTS n 80/20 principle n 80/20/30 principle n large, small and mid-size customers »Profitable customers: –life time relationship. »Customer/product profitability analysis » The profit triangle: n creation high value with low cost: – Competitive advantage

TOTAL QUALITY MARKETING n Edward Deming, American Statistician taught Japans the methodology of quality improvement n Malcolm Baldrige Award in the US focuses on satisfaction, quality, process, human resources, quality planning, information analysis and leadership. n European Quality Award similar to Baldridge award (ISO 9000)

TOTAL QUALITY MARKETING (CONT.) n Quality Improvement Programs(QIP)-PIMS » Quality Centered Company-Quality products and marketing excellence: n Requirements: –identifying needs and wants –communicating with R&D –timing –instruction and training –handle the complains –listen the advise for improvements.