5

Marketing Management
Chapter 5 – Creating Long-Term Loyalty
Relationships

Dr. Manoochehr Najmi

Graduate School of Management and Economics
Sharif University of Technology
1399-00 (2)
 Learning Objectives

 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?

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 Pulling It All Together
Create value for customers and build Capture value from
customer relationships customers in return

Understand the Design a Construct an Build profitable Capture value

marketplace and customer-driven integrated relationships from customers
customer needs marketing marketing program and create to create profits
and wants strategy that delivers customer and customer
superior value delight equity

Research Select customers Product and Customer Create satisfied

customers and to serve: market service design: relationship loyal customers
the marketplace segmentation and build strong management:
targeting brands build strong
relationships Capture
Mange marketing Decide on a value Pricing: with chosen customer lifetime
information and proposition: Create real value customers value
customer data differentiation and
positioning Distribution:
Manage demand Partner Increase share of
and supply chains relationship market share and
management: share of
build strong customer
Promotion: relationships
Communicate the with marketing
value proposition partners

Harness marketing Manage global Ensure ethical and

technology markets social responsibility 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.

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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

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 Caterpillar Maximizes
Customer Value

Main Competitors: John Deer, Case, Komatsu, Volvo and Hitachi.

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 Steps in a
Customer Value Analysis
 Identify major attributes and benefits that
customers value
 Assess the quantitative importance of different
attributes and benefits
 Assess the company’s and competitor’s
performances on the different customer values
against rated importance
 Examine ratings of customers in a specific
segment against a specific major competitor on
an individual attribute or benefit basis
 Monitor customer values over time
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Value Proposition
Value Proposition consists of the whole
cluster of the benefits the company promises
to deliver; it is more than the core positioning
of the offering.

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 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.

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 Total Customer Satisfaction
Satisfaction is a person’s feelings of pleasure or
disappointment that result from comparing a
product or service’s perceived performance (or
outcome) to expectations.

 Performance<Expectations => Dissatisfied

 Performance=Expectations => Satisfied
 Performance>Expectations => Delighted
 Monitoring Customer Satisfaction
 Periodic surveys
 Customer loss rate
 Mystery shoppers: monitor company’s and competitors’
performance

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 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.
Maximizing Customer Lifetime
Value

Customer Profitability

Customer Lifetime Value

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Figure 5.3 Customer-Product
Profitability Analysis

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Customer Lifetime Value
 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.

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 Framework for CRM

 Identify prospects and customers

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

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 Attracting and
Retaining Customers

 Reduce the rate of defection (churn)

 Increase longevity of the customer relationship
 Enhance share of wallet: Cross-selling and
Up-selling
 Terminate low-profit customers
 Focus more effort on high-profit customers

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Figure 5.4 The Marketing Funnel

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 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?

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