1

5
Creating Long-Term
Loyalty Relationships
 Chapter Questions

▪ What are customer value, satisfaction, and

loyalty, and how can companies deliver them?
▪ What is the lifetime value of customers and
how can marketers maximize it?
▪ How can companies attract and retain
customers and cultivate strong customer
relationships?
▪ What are the pros and cons of database
marketing?

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-2

 Figure 5.1 Customer-Orientations

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-3

 What is
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 and the
perceived alternatives.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-4

 Figure 5.2 Determinants of
Customer Perceived Value

Total customer benefit Total customer cost

Product benefit Monetary cost

Services benefit Time cost

Personal benefit Energy cost

Image benefit Psychological cost

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-5
 What is Loyalty?

Loyalty is a deeply held commitment to re-

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

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-6

 Top Brands in Customer Loyalty

▪ Apple iPhone ▪ Google

▪ Clairol ▪ Amazon
▪ Samsung ▪ Bing
▪ Mary Kay ▪ J.Crew
▪ Grey Goose ▪ AT&T Wireless
▪ Clinique ▪ Discover Card
▪ Avis ▪ Verizon Wireless
▪ Wal-Mart ▪ Cheerios

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-7

 Establishing Value

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 Measuring Satisfaction

▪ Periodic surveys
▪ Customer loss rate
▪ Mystery shoppers
▪ Monitor competitive performance

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-9

 Managing Customers

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-10

 What is 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.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-11

 Maximizing Customer Lifetime Value

Customer Profitability

Customer Equity

Lifetime Value

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-12

 Figure 5.3 Customer-Product
Profitability Analysis

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 Estimating Lifetime Value

▪ Annual customer revenue: $500

▪ Average number of loyal years: 20
▪ Company profit margin: 10%
▪ Customer lifetime value: $1000

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-14

 What is
Customer Relationship Management?

CRM is the process of carefully managing

detailed information about individual
customers and all customer touch points to
maximize customer loyalty.

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-15

 Framework for CRM

▪ Identify prospects and customers

▪ Differentiate customers by needs and value to
company
▪ Interact to improve knowledge
▪ Customize for each customer

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-16

 Amy’s Maximized Word of Mouth

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 Attracting and
Retaining Customers
▪ Reduce the rate of defection
▪ Increase longevity
▪ Enhance share of wallet
▪ Terminate low-profit customers
▪ Focus more effort on high-profit customers

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-18

 Figure 5.4 The Marketing Funnel

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 Loyalty Programs

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 Database Key Concepts

▪ Customer database ▪ Business database

▪ Database marketing ▪ Data warehouse
▪ Mailing list ▪ Data mining

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-21

 Using the Database

▪ To identify prospects
▪ To target offers
▪ To deepen loyalty
▪ To reactivate customers
▪ To avoid mistakes

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-22

 Don’t Build a Database When

▪ The product is a once-in-a-lifetime purchase

▪ Customers do not show loyalty
▪ The unit sale is very small
▪ The cost of gathering information is too high

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-23

 For Review

▪ What are customer value, satisfaction, and

loyalty, and how can companies deliver them?
▪ What is the lifetime value of customers and
how can marketers maximize it?
▪ How can companies attract and retain
customers and cultivate strong customer
relationships?
▪ What are the pros and cons of database
marketing?

Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall 5-24