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

2. 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?

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

4. 5-4 A Customer-Oriented Model?

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

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

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

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

9. 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

10. 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

11. 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.

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

13. 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.

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