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CHAPTER- 5.

BUILDING CUSTOMR SATISFACTION.

For long term sustainability, business entities need to build customer satisfaction.

Customer satisfaction involves - Customer creation.
- Customer maintenance/ Retention.

Customer Creation:

Q: How can a business entity create customer?
Q: How do today’s customers make their choices from product available?

Possibly, buyers buy from that business entity they perceive offers the highest
customer delivered value.

CUSTOMER DELIVERED VALUE:

CDV is the difference between Total Customer Value and Total Customer Cost.

Total Customer Value is the bundle of benefit customers expect from a product/ service.
Total Customer Cost is the bundle of cost customer expect to incur in evaluating/ obtaining of
using product or services.

Eg.- Two Wheeler……. Choice - Hero Honda Splendor / Kawasaki Bajaj Boxer.

Customer value is made up of:

- Product Value - Preference
- Durability
- Reliability

- Service Value - Delivery
- Maintenance

- Personal Value - Knowledge
- Handling

- Image Value - customers perception of corporate image.

Customers costs are made up of - Monitory cost.
- Time cost.
- Energy cost.
- Psychic/ psychological costs.

CDV = TCV / TCC

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Deviation from CDV could be due to,
- Policy of buying lowest price products.
- Long term benefits not appreciated.
- Other reason (Personal Friendship).

Long term benefit is not appreciated always. When it comes to cost, people goes for lower
one without realizing that they may now profit for a longer period.
Eg.- Philips CFL of 18 watts (135/=)
Chinese CFL of 18 watts (35/=)

Customer Satisfaction:

Person’s feelings of pleasure/ disappointment due to a comparison of a product
perceived performance with his/ her expectations.

Eg.- Satisfaction = Fn (Perceived Performance, Expectations).

High satisfaction happens when perceived performance exceeds expectations.

Buyer’s expectations influenced by – Past performance
- Friend’s/ associated advice
- Competitor information/ Promise
- Marketer’s information/ Promise

Successful companies raise expectations & deliver performances.
i.e., Aim for total customer satisfaction.

Q: How to deliver/ produce customer value & satisfaction?
A: Use concept of Value Chain.

VALUE CHAIN:
- Proposed by Michael Porter.
- Tool to create higher customer value.
- Identifies main activities that creates (value + cost) in a business.

Five – Primary Activities: Four – Secondary Activities:
- Inbound Logistics. - Procurement.
- Operations. - Technology Development.
- Outbound Logistics. - HR- Management.
- Marketing/ Sales. - Firm Infrastructure.
- After Sales Service.

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Task of Business Entity is to examine costs & performance in each value creating activity &
try to improve it.
Success depends on - Performance of each unit.
- Co-ordination.

Core business process involving cross functional inputs or co- operation needs to be managed
smoothly. Specifically,
- New product realization process.
- Inventory management process.
- Order- to- remittance process
- Customer service process

Customer Retention:

Market oriented strategic planning.
Customer can be retained through
- Setting high switching barrier .
- Delivering high customer satisfaction (better approach).

Achieved through Relationship Marketing.

Relationship Marketing:
Customer development cycle/ process.
Starting point – Suspects/ Anyone who may possibly buy product/ service.

Prospect: People who have strong potential interest in product & ability to pay for it.
Disqualified Prospect: Company rejects due to poor credit/ unprofitibality.
Client: Buy only from company when they buy.
Advocate: Customer who praise company & encourages others to buy.
Partner: Customer & company work together actively to promote company.

Developing loyal customer increases company revenues. However, company needs to spend
more to built customer loyalty.

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SUSPECTS PROSPECTS DISQUALIFIED
PROSPECTS

1ST TIME
CUSTOMER
INACTIVE
REPEAT OR
CUSTOMER EX- CUCTOMER

CLIENTS

ADVOCATES

PARTNERS

Q: How much should a company invest in customer relationship building?
A: Returns/ Profits from customer loyalty should b more than investment in customer
relationship building.

Based on above, five levels of company investment in CRB emerges.

1. Basic Marketing: - Sales person simply sales product.
2. Reactive Marketing: - Sales persons sales product.
- Encourage customer to call if he/ she has any complaint/ question/
Comment.
3. Accountable Marketing: - Phone customer once after sales to check whether product is
meeting expectations.
- Also ask for suggestions to product/ service.
4. Proactive Marketing: - Company contacts customers from time to time with suggestions
about improved products uses / new products.
5. Partnership Marketing: - Company & Customers work together to discover ways to
increase customer savings/ performance.

Marketing tools to develop stronger customer bonding/ satisfaction could be
- Adding financial benefits.
- Adding social benefits.
- Adding structural benefits.

Adding Financial benefits:
Types could be – Frequency Marketing Programs.
- Club Marketing Programs.

Frequency Marketing Program is designed to provide rewards to customers who buys
frequently and or in substantial amount.

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Club Marketing Program is affinity group created for increasing bonding. Club membership
offered on purchase of product or on payment of some additional fee.

Typically, first company to introduce FMP/CMP gets maximum benefit (especially if
competitor is slow to respond)
After some time, when all companies offer FMP/CMP, these may become financial burdens.

Adding Social Benefits:

Company personnel work on increasing social bonds with customers by individualizing/
personalizing their customer relationship.
Effort is to convert customer to client.
Eg.- ITC on notebooks donating some money , personalized cheque book.

Adding Structural Benefits:

Supply customers with special equipment/ services to help them manage their work.
Eg.- computer hardware supplier may offer basic computer training.

Ultimately, Marketing has been the act of attracting & retaining profitable customer.

Profitable Customer: Person/ Household/ Company that over time yields revenue that
exceeds by an acceptable amount the company’s cost of attracting/ selling/ servicing hat
customer.

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