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Marketing Management 15th Edition Kotler Solutions Manual 1
Marketing Management 15th Edition Kotler Solutions Manual 1
CHAPTER
5 CREATING LONG-TERM
LOYALTY
RELATIONSHIPS
LEARNING OBJECTIVES
In this chapter, we will address the following questions:
1. What are customer value, satisfaction, and loyalty, and how can companies deliver
them?
2. What is the lifetime value of customers and how can marketers maximize it?
3. How can companies attract and retain the right customers and cultivate strong
customer relationships?
4. How do customers’ new capabilities affect the way companies conduct their
marketing?
CHAPTER SUMMARY
1. Customers are value maximizers. They form an expectation of value and act on it.
Buyers will buy from the firm that they perceive to offer the highest customer-delivered
Copyright © 2016 Pearson Education, Inc.
value, defined as the difference between total customer benefits and total customer cost.
2. A buyer’s satisfaction is a function of the product’s perceived performance and
the buyer’s expectations. Recognizing that high satisfaction leads to high customer
loyalty, companies must ensure that they meet and exceed customer expectations.
3. Losing profitable customers can dramatically affect a firm’s profits. The cost of
attracting a new customer is estimated to be five times the cost of keeping a current
customer happy. The key to retaining customers is relationship marketing.
4. Quality is the totality of features and characteristics of a product or service that
bear on its ability to satisfy stated or implied needs. Marketers play a key role in
achieving high levels of total quality so that firms remain solvent and profitable.
5. Marketing managers must calculate customer lifetime values of their customer
base to understand their profit implications. They must also determine ways to increase
the value of the customer base.
6. Companies are also becoming skilled in customer relationship management (CRM),
which focuses on developing programs to attract and retain the right customers and meeting the
individual needs of those valued customers.
OPENING THOUGHT
Although most students understand the concept of “buying,” some will have difficulty in
understanding the differences between total customer value and total customer cost. It will be
beneficial for long-term understanding and retention to cover what the definition is and what it
is not. Secondly, the distinction between satisfaction and total customer satisfaction for the
consumer might be challenging for some students. Some students may have a hard time
understanding the distinction between perception and expectation. Finally, it might be necessary
to reemphasize the concepts of Customer Relationship Management (CRM), customer
databases, and database mining often in the lecture. Students may confuse the concept of
mailing lists with databases. However, most of the students today are proficient in Internet usage
and can cite examples of relationship marketing from their own favorite Internet sites such as
Amazon.com.
PROJECTS
1. At this point in the semester-long marketing plan project, students should have completed
their value proposition for the fictional product, defined how they will deliver satisfaction
and maintain customer loyalty.
2. Have students (in groups or individually) select a local firm in their community, or a local
division of a national firm, and seek permission to interview their corporate executives on
their corporation’s definition of customer satisfaction, loyalty, and what their particular firm
does to foster such customer relations. This project can be combined with the project on
marketing research and as such, students can create questionnaires suitable for mailing to
these executives. The students can then present these findings to the class in a group or by
3. Sonic Smartphone Marketing Plan: Sonic has decided to focus on total customer
satisfaction, because studies have shown that customers who are “completely satisfied” with
the product or service are much more likely to buy more from the company than customers
who report they are “satisfied.” You have been asked by Jane Melody to:
Review the possible ways to gain customer satisfaction information and write the recommended
approach in a marketing plan or enter into the Positioning section of Marketing Plan Pro.
Have each of the students read 1 Michael Tsiros, Vikas Mittal, William T. Ross Jr., “The
Role of Attributions in Customer Satisfaction: A Reexamination,” Journal of Consumer
Research, 31 (September), 2004, pp. 476-483 and comment on their findings.
Customer relationship management is a current business “buzz word.” Students can be directed
to do an Internet research project from named marketing/business journals on the subject of
customer relations management (the chapter’s endnotes can provide a good source of leads for
the students). Each student can be directed to research, read, and compile a report on their
findings from a minimum of five articles from five different marketing (and business magazines
such as Fortune). The student’s report is to comment on how these articles compare,
complement, or contrast the material contained in this chapter.
The research firm J.D. Powers and Associates (jdpower.com) lists eight categories of products
for consumers to research before purchasing the product or service. Breaking up the class into
eight groups, have the students research the top performers for each category and be able to
share their findings as to what characteristics, policies, procedures, and vision these top rated
companies have in common. Is there a “common” link among all of the winners? Are there
differences? In terms of the material contained in this chapter, how would you explain these
similarities and differences?
END-OF-CHAPTER SUPPORT
MARKETING DEBATE—Online Versus Offline Privacy
As more firms practice relationship marketing and develop customer databases, privacy issues
are emerging as an important topic. Consumers and public interest groups are scrutinizing—
and sometimes criticizing—the privacy policies of firms and raising concerns about potential
theft of online credit card information or other potentially sensitive or confidential financial
information. Others maintain online privacy fears are unfounded and that security issues are as
much a concern offline. They argue that the opportunity to steal information exists virtually
everywhere and it’s up to the consumer to protect their interests.
Take a position: Privacy is a bigger issue online than offline versus Privacy is no different
online than offline.
B) Organizations would change by beginning to take a long-term perspective rather than a short-
term (quarter-to-quarter view). No longer viewing a customer as a “transaction” but rather as a
“lifetime value” solidifies and demonstrates the impact that a single consumer has to a firm in a
language they understand—dollars. Firms would begin to customize offerings and messages to
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