Lesson 2

MEETING CUSTOMER EXPECTATIONS

We are all customers who have certain expectations of the products and services that we purchase. When purchasing a
product for the first time, we often have preconceived notions of how it can satisfy our needs.
Customer expectations refer to the perceived benefits and results a customer expects when buying and using a product or
availing of a service.
1. Reliability - the ability to provide the expected benefits and results consistently.
2. Tangibles - the quality of physical facilities, personnel, and communication services.
3. Responsiveness - the willingness to provide prompt service and assistance.
4. Assurance - the ability to convey trust and confidence through expert knowledge and courteous
service 5. Empathy - the care and attention given to each customer.
Marketers then employ another strategy called the Blue Ocean strategy. This strategy encourages
businesses to expand their market base and acquire new customers by creating new value which will give
rise to new demand. This is achieved through product differentiation and low cost.

CUSTOMER VALUE
The customer's perceived value refers to a customer's assessment of the benefits gained from buying and using a product
compared to its cost as well as the competing offers on the market. The graph outlines how the customer determines
value.

CUSTOMIZED CUSTOMER SERVICE

Customization means matching the specific wants of every customer with a certain product offering of the company,
creating value and ensuring customer satisfaction.
CUSTOMER RELATIONSHIP AND CUSTOMER SERVICE
HAPPY EMPLOYEES MAKE HAPPY CUSTOMERS
Effective customer service starts with frontline people, as they face customers most of the time. The company must also
ensure the satisfaction and happiness of its employees,
MARKETING AND CUSTOMER RELATIONSHIPS
Once the business has convinced consumers to patronize its products, another important task that marketers should focus
on is establishing and maintaining a relationship with them to ensure their continued patronage of the company's products
and services. Ensuring customer loyalty maximizes the profit potential of a business.

Customer Relationship Management (CRM) refers to the development of strategies to establish and sustain desirable
customer relationships. The full profit potential of a business through customer relations centers on three aspects:
acquiring new customers, maintaining existing customers and enhancing their profitability, and prolonging
relationships with customers. Businesses also devote efforts to regaining customers whom they have lost and convincing
them to patronize the business again. CRM aims to maximize the exchange relationship between the company's
investment on customer relations and the profit generated by customer loyalty.
Relationship marketing strives to
1. Understand the customer's needs,
2. deepen the buyer's trust,
3. enable customers to participate in the creation of value,
4. enhance cooperation and mutual dependence, and
5. build satisfying exchange relationships.
CUSTOMER EQUITY AND LIFETIME VALUE
Recognizing the value of the customer is essential in marketing. The central importance of the customer is echoed in
statements such as "the customer is king" and "the customer is always right." One aspect of customer relationship
management is the collection and analysis of data on customers.
1. prospective customers are profiled and monitored.
2. customers' personal data and transactions are recorded in the company database; the information is used to track
customer buying patterns, their preferences, and expectations.
3. the collected data is utilized to measure the customers' lifetime value (customer equity)
Customer lifetime values are determined by calculating the profit gained from each customer within a specific time
period (usually within a year). The sum of the customer lifetime values of all current and future customers determines
customer equity.
MEASURING CUSTOMER LIFETIME VALUE AND CUSTOMER EQUITY
The steps in computing for customer lifetime values and customer equity are as follows:
1. estimate the amount of money each customer spends in a year
2. calculate the total profit each customer generates each year
3. determine the amount spent in acquiring a new customer
4. determine the net cash flow by subtracting the acquisition cost per customer
5. calculate the present value of the net cash flow per customer
6. add up the present value of all net cash flows throughout the analysis period to obtain the customer lifetime value.

The Net Cash flow is determined by subtracting the estimated cost of customer acquisition per customer. Let us assume
that the acquisition cost of each customer is equivalent to 30% of their total cash flow. This will yield the following values
for the net cash flows per costumer.

Net Cash Flow = Total Cash - Acquisition Cost

To determine the present value, multiply the net cash flow by the present value discount factor. The present value discount
factor is determined by management to be 5% interest rate. Based on the present value table, the discount factors are: Year
1 = 0.952; Year 2 = 0.907; and Year 3 = 0.864. The sum of the computed values over three years will be the computed
lifetime value of the customers.

Computed Lifetime Value

Determining the lifetime value of each customer allows the company to quantify customer behavior. Marketers can
identify which customers contribute heavily to the company's profit and concentrate their efforts on retaining the
customers and maintaining positive relationships with them. The company can also focus on less profitable customers and
determine ways to further increase their profitability. These data have an impact on marketing strategies.

CUSTOMER SERVICE IS MARKETING

All activities related to customer service is part of marketing. Customer-related activities, including face-to-face
interaction, phone calls, and emails, are part of marketing. Marketers utilize considerable resources to build positive
relationships with their customers and the public. Marketers determine the type of customers they want to attract, the
brand image they wish to project to the public, and the means by which they can communicate the benefits of their
products to potential customers,